We have a person that handles my company 401K and my investment portfolio as well. I am sure he means well, but there is always that doubt in the back of my mind suggesting we aren’t getting the best advice.
For instance he suggested we pull out all the equity in our home to invest. We had been trying to pay the house off.
I am 62 my wife is 50. No kids living at home. I own my own business and building … well the bank does.
I welcome any thoughts.
This question from Steve is great, not just for the reactions I’m sure you all had when you read his advisor’s advice, but because it brings up a larger issue. Should you borrow money to invest? Let’s talk it through.
For the average American, borrowing money to invest doesn’t make sense. But in all honesty, Steve’s advisor could be technically correct. In theory, Steve’s portfolio could earn more than the interest he would pay on the house which would make it a net win. Yet, the risks are so high. The “ifs” too complex.
Let’s play Best Case Scenario and Worst Case Scenario:
Best Case Scenario: You out pace the interest you would pay on your mortgage by a few points. That’s about it. Hoping for anything more would be unrealistic.
Worst Case Scenario: You lose a lot of money and are stuck with a mortgage into retirement.
While your advisor’s advice could technically work, it’s way too risky for a 62 year old to make.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.