The Companion Advisor:
General Interest
Debt
you say?
By Eve Brouwers
A Companion Advisor article
More than ever, Canadians have been embracing debt as a means to
an end. After the last couple of debt articles, I received more email and
calls than any past topic. Many of you have asked me to shed some light
on some of the more complex strategies you've been hearing about. Last issue
I discussed borrowing against the equity in your home and how you can easily
get the best rates. Now it's time to look at how you use this money for
best gain.
Leverage My What?
Financial experts are high on low interest rates and will remain so at least
while rates stay low. And, with home equity hitting new highs, consumers
are quickly becoming "paper" wealthy rather than "cash"
rich. So how do you turn your paper wealth into cash investments? One method
of accessing your home equity is to leverage it. This is a term used when
one borrows a little in hopes of gaining a lot.
Let me caution you before I go on. Leveraging is not without risk and
must be fully understood before you jump in. There are several factors
to consider before you put your hard-earned asset on the line.
What's At Risk?
Whenever you leverage, you run the risk of not gaining as much as you
planned. Also, there is a risk that interest rates rise beyond your comfort
level and your lifestyle may be compromised because your payments become
too painful. Either way, something will have to give. Your financial advisor
should provide projections using realistic rates for both borrowed money
and investment returns.
Some financial institutions offer non-callable lines of credit specifically
for leveraging purposes, an important feature. This is just as important
as picking the right investment. Pick investments that can reduce your
risk while giving you the opportunity for higher returns.
Investment Security
Naturally, there are a few investments that you can enjoy while you pay
off your loan. A home renovation is just one example. Another type is
setting up specific investments structured to achieve your goals. This
uses a complex borrowing strategy and requires you or your advisor to
set up a complete plan utilising lines of credit along with investments.
Eve Brouwers is a successful management consultant
and business strategist working within financial services for the past
25 years. Her hallmark no-nonsense methods make her the consultant of
choice when businesses want to get serious about results. Eve can be reached
at Nautical Consulting Group email contactncg@sympatico.ca.
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, Fiscal Agents Money Management Newsletter
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