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If the interest rate on your debt is less than the rate of inflation, you make money by holding a loan. The current rate of inflation is 5%, the interest rate o
by Invictus0 5y ago
If the interest rate on your debt is less than the rate of inflation, you make money by holding a loan. The current rate of inflation is 5%, the interest rate of a margin loan on IBKR is 1.5% and under. When inflation finally slows, expect a ton of money to come out of the stock market.
- rileymat2 5y agoThat presumes your pay is rising with inflation, or some tangible asset you hold.
- exegete 5y agoYou don’t make money having a debt. You’re still accruing interest to pay. I think another way to think about it is that the lender is not making a profit when inflation is factored in. It’s a bad deal for them and a good deal for you. Additionally if you invest the debt into something that beats your loan’s interest rate then you’ll make money, which is more likely now, since any worthwhile investment would have a rate at least inflation (for example, I-bonds).
- reducesuffering 5y agoAssets can already rise 30% in anticipation of 5% inflation above risk-free interest for 6 years. Then you can buy in right at the time that interest rates rise to counter that inflation. Congrats you've just purchased assets that now drop due 30% due to interest rate increases at the same time you're margin loan interest increases to 5% to hold it.