3 ms·
When I got my mortgage in 2001, I was offered 3x the debt I would take on. Three times the debt. I told the broker that was insane, and she just said it was v
by e40 8y ago
When I got my mortgage in 2001, I was offered 3x the debt I would take on. Three times the debt. I told the broker that was insane, and she just said it was very, very common. Nope, not going to do that, I said. She thought I was silly.
About 5 years later (not due to the 2008 crisis), I would have lost my home had I done the 3x. As it was, I was able to weather the storm.
In financial matters, be very conservative. That is my advice.
- eftychis 8y agoThis. Always consider what happens if you lose your investment/ what is your worst liability. Be skeptical about assuming that events (e.g. different kinds of securities crashing) are independent. That is one of the usual assumptions asset managers persuade the world and perhaps themselves that has been a factor in multiple crises. Finally, I am a big proponent of Graham's approach that the risk you can take is proportional to your time investment and focus, i.e. analysis and research you have done. Markets change. The idea is to be able to survive the russian roulette in the process. You might be able to afford some debt now, but will you be able to in the future, if e.g. your currency crashes? For instance, several profitable Turkish businesses are on the hook now, as they signed U.S. dollar based loans. Tip1: If a position on a security appears hot now, and people commonly buy it, it is probably overvalued. Tip2: Learn to skip opportunities. Invest in areas where you have done your research and know. Tip3: Assume the person in front of you always has a financial interest in convincing you to buy or sell -- except if they have a fiduciary responsibility to you by law (and still pick advisors carefully).