As a general rule of thumb, you want to pay off all debt that exceeds your anticipated rate of return from your investment. If that is 8%, you want to pay off all debt near, at or above 8% interest. While it may be tempting to shortcut your way to success by investing in leveraged assets or buying on margin, this is not a successful strategy for most people. IBD Videos Get market updates, educational videos, webinars, and stock analysis. Newer IPO stocks like Zoom Video, Chegg and DocuSign have ridden the Covid-19-driven zeitgeist to new heights. This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy.
Plus, starting anything for the first time can be intimidating—especially when it’s something that can have long-term effects on your finances. The truth is, very few people can perfectly time the market, and I’m sorry, but you’re not one of them.
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That’s ok, though, because you can beat it with Dollar Cost Averaging. When you look at investing on a personal scale, it’s very rare for a sudden move in price to mean very much. Unless something cataclysmic happens, things will balance out, so be patient. Visit our How to Invest Money resource page for podcasts, articles, and our no-bullshit, just-usable-facts approach. The tool is incredibly detailed – we’ve explained it all in our extensive Betterment Review.
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It does not make sense for most people to borrow money to invest. Let’s say you have a car loan of $20, 000 but you also have $20, 000 in the bank. You have good borrowing history, so your interest rate on this car loan is 4% per year. Rather than pay off your car loan, you decide to invest that money. Your anticipated rate of return is 8% over the next year.
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