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Dave Ramsey, who, for lack of a better term, one might describe as a "personal finance turn-around guru and radio personality", poses the question you ask in a
by brightsize 12y ago
Dave Ramsey, who, for lack of a better term, one might describe as a "personal finance turn-around guru and radio personality", poses the question you ask in a different way. I paraphrase: "If you owned your house outright, would you go out and get a mortgage on it so that you could invest in the stock market?".
Financial management is about much more than maximizing returns. It's also about managing risk. For most people who have assets that they will depend on in the future, managing risk grows in importance as they grow in age. Taking on debt (a mortgage) in order to make speculative investments is a high-risk endeavor.
- throwaway283719 12y agoI didn't mention anything about the stock market. I said if you can invest somewhere with a return greater than 3.5% after tax. Implicit in that was that the investment is risk-free i.e. it's a government bond or something. But it could be a risky investment, if the risk-return trade-off is high enough. If I had the opportunity to invest at a 10% rate of return with a stdev of 5% then absolutely, I'd remortgage my house at 4% to do that!
- timwaagh 12y ago3.5% is not risk free. with interest rates this low, that kind of investment cannot be offered risk free. government bonds that have such roi are not going to be safe either.
- throwaway283719 12y agoYes, that is why the sentence begins with the word "if".
- tomp 12y agoIf it's too good to be true, it probably is.