In addition to the answer from CQM, let me answer your 'am I missing anything?' question. Then I'll talk about how your approach of simplifying this is making it both harder and easier for you. Last I'll show what my model for this would look like, but if you aren't capable of stacking this up yourself, then you REALLY shouldn't be borrowing 10,000 to try to make money on the margin.
Am I missing anything? YES. You're forgetting (1) taxes, specifically income tax, and (2) sales commissions//transaction fees.
On the first: You have not considered anything in your financial model for taxes. You should include at least 25% of your expected returns going to taxes, because anything that you buy... and then sell within 12 months... is taxed as income. Not capital gains.
On the second: you will incur sales commissions and/or transaction fees depending on the brokerage you are using for your plan. These tend to vary widely, but I would expect to spend at least $25 per sale.
So if I were building out this model I would think that your break-even would have to at least cover:
On over-simplifying: You have the right idea with thinking about both interest and principal in trying to sketch this out. But as I mentioned above, you're making this both harder and easier for yourself.
You are making it harder because you are doing the math wrong. The actual payment for this loan (assuming it is a normal loan) can be found most easily with the PMT function in Excel: =PMT(rate,NPER,PV,FV)... =PMT(.003, 24, -10000, 0). That returns a monthly payment (of principal + interest) of 432.47.
So you actually are over-calculating the payment by $14/month with your ballpark approach. However, you didn't actually have all the factors in the model to begin with, so that doesn't matter much.
You are making it artificially easier because you have not thought about the impact of repaying principal. What I mean is this--in your question you indicate:
I'm guessing the necessary profit is just the total interest on this loan = 0.30%($10000)(24) = $720 USD ? So I'll break even on this loan - if and only if - I make $720 from stocks over 24 months (so the rate of return is 720/(10000 + 720) = 6.716%).
This sounds great-- all you need is a 6.716% total return across two years. But, assuming this is a normal loan and not an 'interest-only' loan, you have to get rid of your capital a little bit at a time to pay back the loan. In essence, you will pay back 1/3 of your principal the first year... and then you have to keep making the same Fixed interest + principal payments out of a smaller base of capital.
So for the first few months you can cover the interest easily, but by the end you have to be making phenomenal returns to cover it.
Here is how I would build a model for it (I actually did... and your breakeven is about 1.019% per month. At that outstanding 12.228% annual return you would be earning a whopping $4.)
At least as far as the variables are concerned, you need to be considering:
Your current capital balance (because month 1 you may have $10,000 but month 2 you have just 9,619 after paying back some principal).
Your rate of return (if you do this in Excel you can play with it some, but you should save the time and just invest somewhere else.)
Your actual return that month (rate of return * existing capital balance).
Loan payment = 432 for the parameters you gave earlier.
Income tax = (Actual Return) * (.25). With this kind of loan, you're not actually making enough to preserve the 10,000 capital and you're selling everything you've gained each month.
Commission = ($25 per month) ... assuming that covers your trade fees and broker commissions. I guarantee you that this is not the deal breaker in the model, so don't get excited if you think I'm over-estimating this and you realize that Scottrade or somewhere will let you have trades at $7.95 each.
Monthly ending balance == next month's starting capital balance.
Stack it all up in Excel for 24 months and see for yourself if you like. The key thing you left out is that you're repaying each month out of capital that you'd like to use to invest with. This makes you need much higher returns.
Even if your initial description wasn't clear and this is an interest-only loan, you're still looking at a rate of about 7.6% annually that you need to hit in order to just break even on the costs of holding the loan and transferring your gains into cash.
