Can you have a positive return with a balance below cost basis?
Have you owned the stock for longer than 2015?  The stock appears to have grown in value since December 2014 from 72.85 to 73.5 which is about 0.89% growth in the year to date (2015).
What you're getting at is the same as investing with leverage. Usually this comes in the form in a margin account, which an investor uses to borrow money at a low interest rate, invest the money, and (hopefully!) beat the interest rate.  is this approach unwise? That completely depends on how your investments perform and how high your loan's interest rate is. The higher your loan's interest rate, the more risky your investments will have to be in order to beat the interest rate. If you can get a return which beats the interest rates of your loan then congratulations! You have come out ahead and made a profit. If you can keep it up you should make the minimum payment on your loan to maximize the amount of capital you can invest. If not, then it would be better to just use your extra cash to pay down the loan.  [are] there really are investments (aside from stocks and such) that I can try to use to my advantage? With interest rates as low as they are right now (at least in the US) you'll probably be hard-pressed to find a savings account or CD that will return a higher interest rate than your loan's. If you're nervous about the risk associated with investing in stocks and bonds (as is healthy!), then know that they come in a wide spectrum of risk. It's up to you to evaluate how much risk you're willing to take on to achieve a higher return. "I work at a mid market investment bank and while we don't usually use required rates of return (when we do it's typically in ranges based on previous experience in the market e.g. PE firms will look at IRR of 25%+ on mezz deals etc...) I can offer some insight into how you can think about it.   ""Required rate of return"" is a fairly arbitrary concept and literally is whatever you define it to be. Typically, the required rate of return is a function of risk i.e. the higher the riskiness of a project, the higher the return must be to compensate you for taking on that risk (this view is as per Markowitz's modern portfolio theory). This is easier said than done however as ""risk"" is tricky to define (The general, though somewhat outdated, rule is that risk = variability of returns).  To your questions:  1. How is rate of return determined: In my field of work (fairly niche) required rate of returns aren't usually an exact science and are typically based on i) financial leverage in the business ii) operating risk (seasonality, management team strength etc...) iii) type of security (e.g. for debt deals, what is the investment secured by)  2. Am I correct in thinking a firm will just choose a rate of return that they are already receiving? No, you are not correct, UNLESS the risk profile of the investment opportunity matches your current business. E.g. if you're a shoe manufacturer earning 15% on your capital and are looking to acquire another manufacturer in the same business with the same risk profile, then you can use your current rate of return as the requirement. If for e.g. you're a shoe manufacturer contemplating opening a new fully automated plant which will cost half your current net worth but allow you to triple your production, you will need to use a different (higher) required rate of return to compensate your firm for the additional risk it's taking on. E.g. if your shiny new plant only gets you a 15% return, you might as well deploy your capital in your current business at a much lower risk and earn the same amount of money.   Disclaimer: I have simplified. Significantly." "I am interested in seeing what happens to your report after you test this, but I don't think it's possible in practice, would not affect your credit score, and also wouldn't be worth it for you to carry a negative balance like that. Having a -1% credit utilization essentially means that you are lending the credit card company money, which isn't really something that the credit card companies ""do"". They would likely not accept an agreement where you are providing the credit to them. Having credit is a more formal agreement than just 'I paid you too much this month'. Even if your payment does post before the transaction and it says you have a negative balance and gets reported to the credit bureau like that, this would probably get flagged for human review, and a negative credit utilization doesn't really reflect what is happening. Credit utilization is 'how much do you owe / amount of credit available to you', and it's not really correct to say that you owe negative dollars. Carrying a negative balance like that is money that could be invested elsewhere. My guess is that the credit card company is not paying you the APR of your card on the amount they owe you (if they are please provide the name of your card!). They probably don't pay you anything for that negative balance and it's money that's better used elsewhere. Even if it does benefit your credit score you're losing out on any interest (each month!) you could have earned with that money to get maybe 1-2% better rate on your next home or car loan (when will that be?).  TLDR: I think credit utilization approaches a limit at 0% because it's based on the amount you owe and you don't really owe negative dollars. I am very interested in seeing the results of this experiment, please update us when you find out!" Judge this stock no differently than any other is the answer.  Optimism isn't fact. http://clarkhoward.com/liveweb/shownotes/2007/06/06/12304/?printer=1 Now because you get to buy extremely low, and sell for probably higher and you believe in the stock, I'd say go ahead and purchase the stock, manage it for taxes with the advice of your advisor and get your portfolio rebalanced as soon as you can.  That might admittedly be a year or more, but as you say you have time. Like any investment, don't spend money you can't lose. The value of debt is that it allows you to profit from the return of equity beyond the amount of actual net equity you own.  Of course, this only works if the cost of borrowing is less than your return on equity.  Market timing matters a great deal but isn't accounted for in this view.  For my answer I would like to hand-wave away market timing considerations.  One plausible justification is that you could default on your current home and then immediately go buy one of equal value.  If you buy a new home of a lesser value (due to lack of funds) and then prices appreciate, then you missed some opportunity cost but probably not $100k worth of it. Moving on, here are some helpful assumptions I'll make. I'll ignore performance of your portfolio after retirement and only seek to optimize F, which will be your net worth upon retirement.  In either case, your current net worth is earning the R2 rate.  We can convert this for both your current net worth and future savings using conversion formulas. Present to future value F = P (1+R2)^x Annual to future value F = S ( (1+R2)^x - 1 ) / R2 Adding these together is sufficient to obtain F in the case that you have no borrowing power.  The case where you do not default and maintain your credit score is different due to an initial $100k penalty and the amortized value of borrowing power.  In a completely theoretical sense, you get an effective (R2-R1) yield on all borrowed money.  The future value will be the following: F = A1 (1+R2-R1)^x One step is missing, however, which is to convert this value (the value of having a good credit score) into present value to compare to value of your defaulting. P of borrowing power = F / (1+R2)^x = A1 { (1+R2-R1)/(1+R2) }^x Now, let's put some specific values in.  Say that you can borrow $300k with your good credit history and this applies for the next 25 years, after which you retire.  The borrowing rate is 7% and the time-value of money to you is 10%.  I would then calculate: P of borrowing power = $58 k < $100 k This indicates that it would be more economical to default.  Of course, some people might point out that it will be removed from your record after 7 years.  If you plug 7 years instead of 25 years into the equation, almost no assumptions about rates will lead to the option of keeping your house being preferable. So in a nutshell, the value of your credit is probably less than $100k in a purely mathematical sense.  But there are other factors too.  If you don't have that borrowing ability maybe you wouldn't be able to borrow money to start the business of your dreams.  If you are a rock star entrepreneur, then time-value of money to you could be 1,000% yield, sure, then maybe you could make the above numbers work (to favor keeping the house).  I've also neglected ethics.  As other people point out, it would be like stealing from the bank. You could pay off a portion of the debt and your minimum payments should also go down proportionately.  Your investment managers may be able to continue making returns in the markets in a sideways and a bear market. So you have 24k contributing to your net worth, and ~50k giving you a negative net worth. At best, you can bring this down to a negative 25k net worth, or you can start and keep using some of the gains from your investment account to supplement your credit payments (along with your income). This is based on chance that your investment managers can continue making gains, compared to paying down 24k and having possibly zero liquid savings now, but having more of your salary to start saving and make the lowered minimum payments, assuming you don't borrow more. Those are the options I've thought of, I don't see either option being necessarily quicker than the other. The short answer is that you would want to use the net inflow or net outflow, aka profit or loss.   In my experience, you've got a couple different uses for IRR and that may be driving the confusion.  Pretty much the same formula, but just coming at it from different angles.   Thinking about a stock or mutual fund investment, you could project a scenario with an up-front investment (net outflow) in the first period and then positive returns (dividends, then final sale proceeds, each a net inflow) in subsequent periods.  This is a model that more closely follows some of the logic you laid out. Thinking about a business project or investment, you tend to see more complicated and less smooth cashflows.  For example, you may have a large up-front capital expenditure in the first period, then have net profit (revenue less ongoing maintenance expense), then another large capital outlay, and so on.   In both cases you would want to base your analysis on the net inflow or net outflow in each period.  It just depends on the complexity of the cashflows trend as to whether you see a straightforward example (initial payment, then ongoing net inflows), or a less straightforward example with both inflows and outflows.   One other thing to note - you would only want to include those costs that are applicable to the project.  So you would not want to include the cost of overhead that would exist even if you did not undertake the project. Metals and Mining is an interesting special case for stocks.  It's relationship to U.S. equity (SPX) is particularly weak (~0.3 correlation) compared to most stocks so it doesn't behave like equity.  However, it is still stock and not a commodities index so it's relation to major metals (Gold for instance) is not that strong either (-0.6 correlation). Metals and Mining stocks have certainly underperformed the stock market in general over the past 25years 3% vs 9.8% (annualized) so this doesn't look particularly promising.  It did have a spectacularly good 8 year period ('99-'07) though 66% (annualized).  It's worth remembering that it is still stock.  If the market did not think it could make a reasonable profit on the stock the price would decrease until the market thought it could make the same profit as other equity (adjusted slightly for the risk).  So is it reasonable to expect that it would give the same return as other stock on average?  Yes.. -ish.  Though as has been shown in the past 25 years your actual result could vary wildly both positive and negative. (All numbers are from monthly over the last 25 years using VGPMX as a M&M proxy) I'd say yes, and hope that my anecdotal evidence serves as proof. My IRA is not a margin account. It can't be.  I attempt to create a covered call, buying a stock at say $20, and selling a call for $4, for net $16 cost. The account only had $1610 at the time, and the trades go through just fine. Yes, I needed to enter as a limit order, at the same time, a single order with the $16 debit limit.  If this is not enough proof, I'd be curious - why not? The option proceeds must clear, of course, which it does. You don't. When you sell them - your cost basis would be the price of the stock at which you sold the stocks to cover the taxes, and the difference is your regular capital gain. Some financial planners would not advise one way or the other on a specific stock without knowing your investment strategy... if you didn't have one, their goal would be to help you develop one and introduce you to a portfolio management framework like Asset Allocation. Is a two of clubs a good card?  Well, that all depends on what is in your hand (diversification) and what game you are playing(investing strategy). One possibility to reduce your basis over time if you would like to hold the stock is to sell calls against it, known as a 'covered-call'.  It can be an intermediate-term (30-60+ months depending on option pricing) trading strategy that may require you to upgrade your brokerage account to allow option trades.  Personally I like this strategy because it makes me feel proactive about my portfolio rather than sitting on the side lines and watching stocks move. One thing to keep in mind is that with Roth accounts, there are different withdrawal considerations based on your contributions. For example, you can withdraw Roth IRA contributions whenever you want in the future.  However this really has nothing to do with your cost basis and purely to do with the contribution amount vs balance. I think your best bet would be commission-free ETFs, which have no minimum and many have a share price under $100. Most online brokerages have these now, e.g. Vanguard, Fidelity, etc. Just have to watch out for any non-trading fees brokerages may charge with a low balance. I'm not 100% sure, but I don't think it would be considered a free ride. The idea of a free ride is that you are engaging in a transaction when you do not actually have the money available to cover it, since the broker is technically giving you a 3 day loan whenever you purchase your stock (3 day rule to settle.) However, if you are using a margin account, and you have enough credit available, then you are not actually using unsettled assets, but rather an additional line of credit which was granted to you. You would just need to make sure that your total transactions are less than your purchasing power. That's my take on it anyway. I hope that helps, and hopefully someone can confirm or reject what I have said. I'm not in the industry, but the point of the quoted section suggests that hybrid debt (instruments with both debt and equity features) count as acceptable capital against upcoming required capital positions.   These instruments are going to be cheaper than using common equity, and provide a leverage effect that can improve the return on equity (same income/cash flow over lower required equity).