What is a reasonable amount of money to borrow if I am planning on investing it?

Asked by Kyle

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Answered by Jeffrey Muhle, Financial Adviser in Manhattan Beach, CA
If the rate you're paying on borrowed funds is less than the yield you can earn on invested funds then borrow as much as you can. For instance, if you can borrow against your home paying 4.0% and invest in first trust deeds earning 9.0% you're making a nice spread of 5%. Just make sure the loan-to-value on the 1st TD is 55% or less. | 10.07.15 @ 23:03
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Jeffrey Muhle, Financial Adviser in Manhattan Beach, CA — I would like to add that borrowing to invest in the stock market is not something I recommend. So, borrowing to invest depends on the investment opportunity. | 10.08.15 @ 17:57
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$commenter.renderDisplayableName() — {comment} | 12.03.16 @ 00:18
Answered by Robert Henderson, AAMS® CDFA® in Mystic, CT
I would suggest that borrowing money to invest is not a very smart idea unless you are prepared for the consequence of what happens if your investments don't live up your expectations. For example, if you borrow $50,000 from your home equity, and you invest that $50,000, and then that investment falls to $25,000, you need to be certain that you can still make your debt payments.
| 10.08.15 @ 17:29
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$commenter.renderDisplayableName() — {comment} | 12.03.16 @ 00:18
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Jeffrey Muhle
Jeffrey Muhle, Financial Adviser in Manhattan Beach, CA

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