Should you use borrowed money to invest?

Recently, I was asked, “Should you use borrowed money to invest?” This person had been told about this great investment (get rich quick scheme) that would make them a lot of money. The initial investment was $5,000 to buy the first products and then sell them and get others involved in selling. The person who wanted to invest did not have the money. They had just started a budget and were in credit card debt. They had $6,000 of available credit on their cards. Their thought was to borrow the money from their credit cards to invest in this sure-fire, money maker.

What did I tell them? Absolutely, positively do NOT borrow money to invest in this or any other type of investments including stocks. Most get rich quick schemes are just that schemes. The only people that make any money are those who start the schemes. If you borrow money to invest, you will end-up losing the money. You’ll have interest tacked on to the original amount you borrowed. You’ll be worse off than you were before; and if you had to buy any type of products, you’ll be stuck with it. Also, if you have to recruit friends to get involved in this scheme, you might just lose a good friend even if they don’t invest. It is not worth it. Never, ever use borrowed money to invest. Only invest when you can afford to lose the money.

I am not saying to not invest, only to make sure that you can afford to lose the money you invest in case your investment goes sour. Never expect to get rich on a get rich quick scheme. They do not work.

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The second image links to www.thepennyhoarder.com site’s article about common retirement mistakes. 

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