Any former West Pointers have some advice on using the Cow Loan? I am interested in buying a car for around 15k and unsure for the rest?

2017-06-20T13:32:53-04:00

Response by LTC Private RallyPoint Member made Jun 20 at 2017 2:54 PM

2017-06-20T14:54:38-04:00

Invest in a high yield stock. When you graduate and start collecting 2LT pay use the interest earned to help pay off the loan. It is a big suck to have that chunk of money taken out of your paycheck each month. Also, get a cheaper car, you'll drive it, not live in it. The more you put away to pay off the loan, the more money you will have to get nicer things when you are free of the Point, on your own, and have a real pay check.

Response by MAJ Private RallyPoint Member made Jun 20 at 2017 7:15 PM

2017-06-20T19:15:45-04:00

Totally agree on with MAJ McKinley Wood on getting a cheaper car; I spent $15K of my $35K loan on a small sedan with 30,000 miles. Some of my classmates spent the whole loan on new Cameros...
I still have my car 6 years later, and my cow loan is totally paid off.
Personally, I invested the maximum amount in a Roth IRA ($5K at the time), and invested the rest of the $15K in a moderate-risk index fund. There is risk associated with any investment, but if you invest in a diversified fund (e.g. index funds or ETFs), you are only left with market risk. If you were to invest directly in stocks, you would deal with both diversifiable risk and market risk. Also, it wouldn't hurt to establish an emergency fund early (roughly two months of income). You won't need one for years, but it's a great opportunity to start early. A good vehicle for your emergency fund is low-risk, liquid money market accounts.
My cow loan experience generally mirrors my current financial strategy, and it has served me well: max out my Roth IRA every year, ensure my emergency fund is topped off, and then invest the rest in moderate risk index funds (which will outpace inflation).

Response by COL Private RallyPoint Member made Jun 22 at 2017 10:07 AM

2017-06-22T10:07:53-04:00

Having been in your shoes many years ago, my personal opinion is to consider an affordable, reliable car (as you have indicated) and placing the rest in a well diversified mutual fund from a reputable company. The type of fund (growth, value, etc.) would depend on when you think you'll need access to what's in the account. For example, if you have a long investment horizon, a growth fund may make sense. And, if you don't need access until retirement, consider an IRA. I personally would not "invest" in a single stock or a few stocks because that gives up the advantages of diversification.

Response by LTC Steve Mannell made Jun 23 at 2017 6:06 PM

2017-06-23T18:06:24-04:00

I bought a new Jeep Wrangler for $12,000 in 1988, and then sold it for $5,000 when I was back at West Point teaching econ with COL Carlos Perez ten years later. I definitely got $7,000 worth of value out of that purchase. No regrets. Loans were smaller back then. The meager remainder joined a small amount I had invested in a diversified group of mutual funds. Diversification and patience is important. Plan your investing strategy to achieve your goals given your risk tolerance and stick with it. All investments not in my IRA wound up "invested" in a honeymoon in 1995. No regrets. Happy to discuss investing strategy further offline if you have questions. There a lots of resources out there online, but sometimes discussion helps put all that information in context.

Response by 1LT Private RallyPoint Member made Jun 28 at 2017 7:08 PM

2017-06-28T19:08:55-04:00

I would recommend investing in your financial education before doing anything with your money. Some books I recommend are "Rich Dad Poor Dad" by Robert Kiyosaki and any of the "Bigger Pockets" books. Feel free to message me if you have any further questions

Response by MAJ Tex Hall made Jul 28 at 2017 1:31 PM

2017-07-28T13:31:51-04:00

Good responses on here! I bought a used vehicle, paid off all debts, and invested the rest. As it turned out, Silver was a bad play at the time. I missed a margin call on one day (I think we had some kind of busy days and cell phones weren't invented yet, lol) and held off the second day waiting for the price to recover. Turns out the Hunt Brothers dumped loads of silver and I lost money. Had I made it to the phone one day earlier, I would have made good money.
Research good investments and follow the lead of the other folks on here. I'd recommend and Independent Financial Analyst since they have a bit more lee way on what to get you into instead of the factory FAs. Either way, you have to trust whoever you pick to manage your money properly.