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Borrowing to Invest vs Saving to Invest
After reading a blog entry on John Chow’s blog, on the topic of borrowing to invest vs saving to invest, I decided to write my own take on the idea, as I am big on investing myself.
The long of the short of the article that I read compared what someone would earn if they look out a loan and invested it as opposed to saving that same amount of money to invest. The borrowed money would be paid off in monthly payments as one would normally expect.
Although I agree with the idea, as I myself often purchase my investments with borrowed money, before jumping into such a venture, you must be sure to do your research on the companies you’re going to throw money that you don’t have into.
The last thing you want is to put your money into a company that tanks, and you’re left with a big monthly payment, and nothing to show for it. I always consider investing to be essentially gambling money, or money I am willing to lose.
If any of the companies I was to be invested in went under, sure I would have the loss, but it’s not like I’d be down and out.
I will never borrow to invest for the maximum amount that I could possibly borrow. NEVER max yourself out - when something pops up that you need money for in an emergency, the last thing you want to have to do is sell stock to be able to pay those bills.
My personal strategy in terms of savings and investment is to put half into investments, and then put 1/4 into cash savings for a large purchase, which leaves you 1/4 for spending money. Ofcourse you can adjust these figures to whatever best suits you, but with half of your money in investments, you can actually make a decent return on the money you invest (20% of $100 is not as much as 20% of $1000), while still allowing for a safe nest egg to be built, and enough money for you to spend to enjoy life.
If your safety nest egg gets bigger than you want it to, you can always just take some of that money and put it into investments, but at least you will have diversified and prepared for the worst. It is always better to be pro-active than re-active!!
Anyways, thats it - hope this helps some of you in terms of trying to figure out what the best thing to do with your money is 
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I would still go for saving to invest. Because we should do what we can with our ability, otherwise we are just inviting trouble for ourselves.. Unwanted stress
Ben
I definitely agree that there should be some aspect of saving, so as not to get into a situation that the USA has gotten to for example!!
Good post there Taris. Well it depends from person to person, how much money a person can save, he can invest it. Now if you are in debt, you wont be able to save much. Also depends on how much you earn.
Definitely - everything should be done proportionally I believe - you can’t just take a million dollar loan to invest if your’e only making 30k a year
Regardless of saving to invest or borrow to invest, the most important thing that you need to do is know what you are doing.
Definitely - otherwise you might as well put it all on red at the local casino!! And welcome to my blog!
Just incase you didn’t know - your blog doesn’t seem to work right now!!