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I am allowed to borrow (tax free) up to 50% of the current vested amount in my 401K. The value of funds borrowed are put in a guarranteed income fund currently paying around 6%. I will have to make monthly payments at a rate of approximately 8.5% which in reality is paid back to my account. I am paying myself.

Thinking that I can do better then the mutual funds offered thru my 401K, I have been considering borrowing 50% of the 401K and investing the borrowed funds using the Dow Dividend approach or the FF4. Not only would this provide me the opportunity to self direct the investment of tax free funds, but also would give me liguidity on my investment returns (returns are taxable of course).

One risk is that the borrowed funds are 100% due and payable upon employment termination, whether voluntary or via lay-off. If the borrowed funds are not paid back then it coverts from a loan to a taxable distribution.

Any opinions on this investment approach.
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