One more piece of advice: Don’t borrow money to make investments

I’ve always believed that investments are for people who have extra cash. I do not think that it is wise to borrow money to make money.  If you are in debt you should not be playing the stock market, since you are risking losing your property if your bets go bad. Remember, if you are paying 5.0% interest on your house loan and you are making %4.0 on your investments, then you are actually losing money. The return on your investments must be greater than the interest you are paying in order to justify them. I am not opposed to all kinds of investments by debtors as long as the investment in question has a very strong probability of giving a high rate of return. For instance, it is probably smart for you to keep giving towards your 401k if your employer is matching a significant amount of your contributions. However, if you want to be more creative, risky, with your investments, I suggest that you would be better off to work hard and pay off your loans first. Then you can use your new-found financial freedom to explore ways to grow your wealth. That way you won’t be betting with other people’s money.

Advertisement