Should You Borrow to Invest?
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- Опубліковано 5 сер 2024
- Thanks for watching: Should You Borrow to Invest? In this video, Colin Exelby discusses when it may make sense to borrow to buy assets, what risks are involved, and how to structure the borrowing. Real Estate, Crypto, Business, stocks...when does it make sense to borrow?
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Great video and presentation. Very informative and to the point 👍
Glad it was helpful! Thanks for the comment!
I think buying stocks with debt is looked at differently from buying a primary residence with debt bc its often more favored than renting. But as opposed to real estate investing, I guess there is no real difference. Since stocks are more volatile, I would imagine youd have to have more down. Worst case scenario, you're making payments on a debt on shares that depreciated to zero. After that happened youd be making payments for nothing. So youd just have know what is the biggest such debt payment you be okay with paying after it all fails, then youd know how much debt to use. Another thing to consider is that if you were well diversified but your assets still fully depreciated, something has to really be going on in the world. Perhaps so much so that money isnt the worry anymore.
Thank you for making this excellent video, I was in doubt but now I know what to do, lend money from my company with no interest, pay from my paycheck, and invest in security bonds...thank you
Glad it was helpful!
Investing in stocks or real estates are very good ideas though real estate investment seems a bit more complex. Who else is in line with me?
Thanks for watching.
So, got money from my line of credit at 3.45%, turned around and getting 10.88% in yield compounded weekly with USDC(crypto stablecoin)... that's almost 300% return. Just insane. Now, there is no capital appreciation but it's much lower risk.
I love hearing real life stories.. Thanks for watching and sharing yours. Of course everyone's situation and tolerance is different. Risk management is paramount when borrowing to invest. Know the upside, know the downside, AND be able to withstand the downside if it happens. DD is the key. Be on the lookout for more videos!
@@seetheforestthroughthetrees I have a question. With the value of dollars going down(can by less and less assets with it) why would I want to repay my line of credit when I only have to pay $26 in interest a month?
Great question! Every situation is different and this isn't a forum for personal financial advice. In providing education and not personal advice, as stated in the question when the interest that you are earning is higher than the interest that you are paying it could be that paying the line back as slowly as possible is most beneficial. However, the risk involved is not having the capital available to pay the loan back when it comes due. The liquidity of the underlying assets that are providing the interest is extremely important. There have been many times throughout history when markets freeze up and formerly liquid assets are unable to be sold for anything close to perecived value. That is why the terms of the loan and the duration of the investment should be aligned. Cheers!
Thinking of doing the same where would you suggest i get a line of credit?
I wonder how this aged lol.
i understand your confusion why it's ok to get HELOC against a home to buy another property or buy a kitchen but it's not ok to to borrow and invest in SP 500 for 30 years. I feel this is an ethical question. The equity is yours and the banks suppress it from the home owner yet the banks are loaning out the money for their gain. I will definitely borrow against my equity to trade options with a hedge. I will never trade without a hedge so I am taking less risk then a RE investor. Banks only do what's best for themselves not you. Start thinking like a bank. Use your equity SAFELY.
Thanks for watching and your comments! I think you may be confused about what I do however. I do not work for a bank. I own my own financial planning company called Celestial Wealth Management so I don't have an incentive here one way or the other.
I understand your point here, but I cannot endorse this strategy with your home equity. For many Americans, the downside risks are just too high.
That is why borrowing from your home to invest in the stock market is typically prohibited by many custodians. That's why you are required to answer where the funds are coming from when making a deposit to invest at many custodians.
The reason is that even though the stock market has averaged high single-digit returns in the past there are periods of time where markets have lost over 50% of their value in a year. The NASDAQ lost over 80% of its value from 2000-2003. And, that key, past performance is no guarantee of future results.
Even with a hedging strategy it is a risky proposition. Even if you have a hedge in place and the market moves against you, you can lose money, just less than being unhedged.
_*This is not personal investment or financial planning advice. You should always consult with your financial and tax advisors before implementing any strategy._
Doge to 1$
Sincerely speaking investment in crypto and forex trading in easier when you have the strategies and knowledge, I tried trading but lost totally.i advise you place your trade with an expert who knows how to trade
Thanks for watching.
Investing in stocks or real estates are very good ideas though real estate investment seems a bit more complex. Who else is in line with me?..
Thanks for watching.