Borrowing to Invest
Borrowing money to invest is a very risky business and qualified, licensed, financial advice should be sought before doing so.
Borrowing to invest is also called “gearing”, more specifically “negative gearing” and the potential high returns can be wonderful, but the potential losses can be devastating as you will have to repay the loans on the investment regardless of your potential losses.
Therefore, you would be crazy not to seek qualified financial advice regarding the pros and cons of borrowing to invest, and whether it is a suitable option for you.
There are two types of loans you can get to use for investing:
• Investment Property Loan – this is where you, as the Lender, take out a mortgage on your property as security for the loan.
• Margin Loan – this is where, you as the Lender, use shares or managed funds as security for the loan.
Should you borrow money to invest?
That depends on your current financial and personal circumstances, and what your long term goals are.
Generally speaking, there are individuals and businesses borrowing money to invest every day. Borrowing to invest is a sound investment strategy as long as the investment is sound. A good investment takes time to choose, knowledge and experience. Make sure you get professional advice from a licensed Financial Adviser to help you decide whether a particular gearing investment is right for you. Real Estate Agents and Salespeople are not licensed and they just look after their clients, not you.
At Baggetta & Co, as licensed Financial Advisers and Accountants, we are obliged under the law to look at your personal situation. Good advice from an experienced, well-informed Financial Adviser can help you save money and become more financially secure.
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