My financial advisor wants me to get a $100,000 home equity loan and he will invest it. Good idea?
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Look at it this way. Let's say you DO lend him $100,000 and you borrow it at 6.5%, for example. You get an additional tax break on the home interest, which probably cuts your effective rate of borrowing to about 6% or so (depending on your tax bracket). Then, let's say, your killer advisor friend says you can make an average 10% annualized on your money in an aggressive portfolio (remember he's SAYING this...) In that best-case scenario, you are basically netting a profit (after paying the interest on the loan after taxes) of 4% or $4,000 on your $100,000 investment. THEN you'll have to pay taxes on some of the ivnestment earnings (unless he puts you in some annuity product, which I suspect he will so he can make bigger commissions from the insurance company selling it to you...) That cuts your net return even more.
Do you REALLY want that much risk for that little overall reward?
My financial advisor wants me to get a $100,000 home equity loan and he will invest it. Good idea?not only is it s dumb idea, its also unethical and against the law. they could lose their securities licenses as well. you should report them since theyre just looking for their commission off you and not trying to actually make you money.
My financial advisor wants me to get a $100,000 home equity loan and he will invest it. Good idea?Sometimes it can be a good idea to borrow to invest. If you can borrow at 7%, say, and you can be confident of making 11% on your investments, then it might be good. There are investment strategies that can expect a 10-12% return, but there is a risk.
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