Comments on: Borrowing to Invest

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Mr. Cheap — Mon, 11 Jun 2007 16:03:09 +0000

Kevin: definitely! A friend of my father’s actually did that, mortgaged his house to buy Nortel (and after it tanked he had to come out of retirement and start working again – ouch!).

I’d be super nervous doing this with pure speculation (planning to sell at a higher value), but I *think* doing it for dividend payments might be a little less speculative (compare how often Bank’s share value drops – every day, to how often their DIVIDEND PAYMENT drops – basically never).

The sleep-at-night-factor certainly is a consideration though. I think if I got doing this beyond my ability to pay the debt myself out of earnings I’d start getting VERY nervous.

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Kevin — Mon, 11 Jun 2007 15:56:25 +0000

I think one reason that more people don’t do this is simply the sleep factor. i.e., “Only follow a financial plan that allows you to sleep at night.”

On the first house I ever bought my mortgage broker floated that idea past me. I was ill just thinking about it; good thing too as the subsequent tech bubble bursting would have made things a bit difficult (imagine a novice investor following this advice and purchasing NT at $125).

However, I wish now that I would have taken up this plan at the bottom of the last bear market.

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Mr. Cheap — Sun, 10 Jun 2007 16:34:25 +0000

I’ll keep my eyes open and read them when you post them. Thanks for the heads up!

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FourPillars — Sun, 10 Jun 2007 15:54:28 +0000

I’m going to be posting about my leverage plan on Wed, Thurs and Fri of this week. I don’t know that you’ll learn a whole lot from my posts since I’m just starting out with the leverage thing myself but it might be worth checking out.

Mike