Many people and businesses borrow to invest every day. Generally, as long as the investment itself is sound, borrowing can be sound too. If you are an experienced investor, are in a high income tax bracket and have income from other sources, then gearing can work for you.
That’s not to say, though, that gearing is for everyone. Individuals and businesses should look carefully at their own financial situations before choosing this investment strategy.
With a 'borrow to invest' strategy, your money works harder for you. Rather than making a series of small contributions over a long period of time, you borrow a larger amount, and invest it all at once. This allows a much larger investment to grow for your full investment period. Then, instead of making additional contributions to your investment, you make interest payments on your loan.
|