Comments on: Don’t Invest Borrowed Money

By: StingyFinance

StingyFinance — Tue, 31 Oct 2006 01:00:36 +0000

I realize that the post is a US view, but I would like to make a Canadian view of investing with a HELOC. In Canada, mortgage interest is NOT deductable. So, by paying down the non deductible mortgage, and investing with the increasing credit limit HELOC, you can make your mortgage interest deductible! We call it the Smith Manoeuvre. Not only that, Canadian HELOC rates vary with prime which is aroudn 6% right now. So if you are in the highest marginal tax bracket, you’re looking at around 4% interest after the tax deduction. Combine that with investing in stable Canadian dividend stocks, you have a long term plan to financial wealth.

Joe
http://www.StingyFinance.com

By: My 1st Million At 33

My 1st Million At 33 — Mon, 30 Oct 2006 13:05:52 +0000

Carnival of Investing #46

Welcome to the 46th Carnival of Investing, hosted at My 1st Million At 33! Thanks to all the contributors to the carnival to make this another great carnival for more learning on investing your money, and thanks to Jonathan for making hosting arrangem…

By: Matt

Matt — Wed, 25 Oct 2006 06:36:24 +0000

It should be noted that it’s extremely difficult to get outside financing for a small business unless one has borrowed substantially against one’s own house first. Investors perceive the decision not to take out a HELOC as a sign of lack of commitment.

I’d never pull money out of the house to play the stock market. But if my business ever needs more capital than I’ve got lying around, I’m not going to hesitate to do it for that.

By: jim

jim — Tue, 24 Oct 2006 20:33:42 +0000

It didn’t mention 0% BT’s, the article was about a guy who wanted to take out a HELOC and invest the money.

By: Miller

Miller — Tue, 24 Oct 2006 18:56:28 +0000

Out of curiosity, does the article specifically mention 0% BTs? That seems to be the most common form of “investing borrowed money” and it seems pretty safe (if you trust yourself). I do it myself. I recognize the risks, but my greedy little hands do it anyway. =) But I was curious if the article mentioned pro’s or con’s of 0% BTs as opposed to loans…

By: kurt

kurt — Tue, 24 Oct 2006 17:45:53 +0000

Actually, you need to come out well north of 6% since you have to pay taxes on the income you gain. Witness: borrow $1000 via equity line, invest for a year. Pay $90 in interest. Earn $90 in returns. Claim $90 as an itemized deduction, but your “income” is increased $90. So you actually net nothing. Did I miss something?

By: John

John — Tue, 24 Oct 2006 17:33:26 +0000

yes definitely I would not recommend investing borrowed money. People can get emotional enough with just regular money.