When Leverage Investing Makes Sense
Friday, April 11th, 2008We’ve been thinking of getting a large ($80,000) leverage loan with deductible insurance and we just pay the interest (while the money supposedly grows) and invest it in mutual funds. We have 6 years to retirement and about $300,000 invested.
Thank you for asking – this is a great question with lots of variables. My initial response though is really a question. I read your question and wondered what deductible insurance was. Then read it several more times and realized you must mean deductible interest. If that’s the case, then my response shifts to the same as it does every time I hear people doing things financially that are obviously above their level of understanding. I have picked up the pieces from more people who have done this very strategy without having a complete picture and the knowledge to do it confidently and safely that I’ve totally lost track of how many. What you are describing is a very good wealth building strategy but in terms of when it makes sense to do it is one of the reasons we have a 12 step process and decision making hierarchy is because youu are considering a step 9 and 11 strategy without having the financial foundation to make this a peaceful and successful plan.
The best thing you have done is to ask. I would be happy to help you develop the knowledge and implement the safety nets to make sure this was appropriate and successful for you – but at this point from your 2 sentences it wouldn’t matter how much you had invested or how many years until retirement – it would not be advisable to do leverage investing – yet.
Congratulations for asking and for taking control. You might consider our new Free 7 day make a difference program to give you some ideas on where to start. Part of that program includes an opportunity to participate in our momentum program to get more detailed answers for you personal situation and the start of the Money Minding Makeover course. You can access it by re-registering at www.moneyminding.com. I hope this helps and I wish you all the peaceful abundance you will deserve.
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