You can't work more hours. Your money can.
Most of us build wealth by trading time for money. That has a ceiling. Here's how borrowing to invest puts more money on the job for you.
Show me howYou need money to make money. So hire more of it.
Rising costs leave less to save, and your savings can only grow so fast on their own. Leverage means borrowing money and putting it to work beside yours. You pay it a wage called interest. If it earns more than its wage, you keep the difference.
Work and save
Your paycheque covers life. What's left over is your first team of dollars.
Borrow to invest
Borrow with nothing down, or bring some of your own and a lender adds more beside it.
Keep the spread
The whole team grows together. After the loan's interest, the extra growth is yours.
It all comes down to the spread
Loan at prime + 1% (5.70%). After-tax cost assumes a 43% bracket. "Same cash, no loan" invests your own money plus each after-tax interest payment yourself. Hypothetical steady returns after fees; 15% is aggressive and shown for comparison only.
A tax break on the way in. The interest comes off your taxes.
Borrow to invest in a non-registered account and the interest is generally deductible. The government picks up part of the cost.
Rounded and hypothetical. Deductibility depends on your situation.
Invest with a floor under your family.
The borrowed money goes into segregated funds with a death benefit guarantee. If you pass away in a down market, the contract pays back at least what went in, so the loan is cleared and your family is not left with the debt.
Leverage fits steady incomes, long timelines and calm nerves.
Markets fall and rates rise, and the loan is owed either way. Let's check whether it fits your budget and size it properly.
Before you borrow to invest
Using borrowed money to finance the purchase of investments involves greater risk than using cash resources only. If you borrow money to purchase investments, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the investments purchased declines. Loans are subject to lender approval and rates float with prime. Interest deductibility depends on your circumstances. Figures on this page are hypothetical, at steady returns after fees, and are not a projection or a promise of future results. Seg fund market values are not guaranteed; the death benefit guarantee is payable on the death of the annuitant, reduced by withdrawals, and subject to contract terms.
Wealthed Up Inc. · Donny Mangos · Ontario, Canada