Hacker News Reader

Comment by jrockway | Hacker News Reader

Stick your cash in a high-yield savings account. Now that's passive income!

You mistyped “put it in SPY on 4x leverage”

Why risk it when you can write a risk-free loan to the federal government at 5.35%? (Maybe it's not risk-free if Congress forces them to default, but the Fed has some plans for that, and the stock market is unlikely to have a great day if we default.)

Margin rates are something like 13% right now. You might get lucky and see SPY do better than 13% a year, but you are risking a lot. People would not buy a primary residence at that rate, for example, and you can live inside that while you pay off the loan.

Not to say I recommend turbo-longing SPY on margin, but a few notes for the less conservative:

If you want to trade on margin, IBKR offers 5.83-6.83% [1] going down as you borrow more. They also pay 4.83% on idle cash.

With that said, you'd probably be better off with UPRO or SPXL for longer-duration holds (since your losses cannot exceed your investment) - and /ES or /MES for short-term holding since futures contracts are 60% long term capital gains treatment no matter how long you hold them.

> People would not buy a primary residence at that rate, for example, and you can live inside that while you pay off the loan.

If that's your benchmark we know people are paying more than 5.83% for 30-year fixed ;)

[1] https://www.interactivebrokers.com/en/trading/margin-rates.p...

If you want a leveraged position in the S&P 500 (either long or short), you can buy/sell S&P 500 futures with an implied financing rate that is approximately the risk-free rate. That's better than using margin. If you did use margin, Interactive Brokers offers lower margin rates than most retail brokers.

That's smart!

Reply on news.ycombinator.com