It is Sunday August 1, 2004, 5:00 PM, and Joe and Mary Smith of 12 Tranquil Bay, are preparing a back yard Mortgage Burning BBQ with neighbours, who are arriving shortly. Joe & Mary bought their house brand new for $90,000, 20 years ago, when the cul de sac was brand new.
School friends, Glen & Susan bought 10 Tranquil Bay, and Keith & Barbara bought 8 Tranquil Bay, in the same cul de sac that same summer.
After dinner and dessert, Joe & Mary pull out their mortgage, go over to the BBQ, and after a small speech and a toast, they toss the mortgage papers into the BBQ, and watch as it bursts into flame and then disappears into ash. Everyone applauds. Joe & Mary smile and sit back down to enjoy a few drinks with their friends.
Joe says, - we have added $100 per month extra to our payment, and it has knocked 5 years off our mortgage. To his friends, Joe asks - How are you doing with your mortgage ?
Barbara says - well, we were like you, we felt it was important to invest our money, but instead of putting $100 per month extra on our mortgage, we decided to put it into Equity Funds. So today, we still have 5 years left on our mortgage, but we now have an investment account, that has grown an average of 9%, worth $66,000.
Mary says - that is an interesting approach. Glen, what kind of plan have you & Susan followed.
Glen says - well, Susan and I still have our mortgage for another 5 years. So, like both of you, we also used $100. per month, but a little differently than either of you.
We decide to do Leveraged Investing and make an Investment Loan. We took the Investment Loan and like Keith & Barb, and invested it in Equity Funds. But, we used the $100 per month, as an Interest Only Payment on the investment loan, which we still have today.
Results of the three couples money management and investment strategies after 20 years -
Joe and Mary - paid the $100 per month as additional payment on the mortgage.
- paid off mortgage, no additional investments
Keith and Barbara - invested the $100 per month
- 5 years of mortgage left and account of $66,000.
Glen and Susan - paid the $100 per month as interest on an Investment Loan
- 5 years of mortgage left & Net Investment Account of $102,000.
Leveraged Investing is a double edge sword, and should only be used by Aggressive Investors with a high Risk Tolerance.
Consider if Leveraged Investing can accelerate your Nestegg growth.
Richard Lepinsky - EPC - 250-889-3784 Sign up for The Nestegg Minute, a monthly investment newsletter Sign Up for The Insurance Minute, a monthly insurance newsletter Your Guy to call, to protect your lifestyle and nestegg from a fall Article Source: http://EzineArticles.com/?expert=Richard_Lepinsky |
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