this post was submitted on 23 Jan 2025
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Just FYI for whoever needs to read this: If you go into debt for a single investment, it's a mistake. You are supposed to invest your excess, into as many isolated pools as reasonable. If you're part of the majority of the population, which doesn't have an excess, you are not investing - you are gambling.
This is not really applicable and only works if you look at investments pretty naively.
The most obvious rebuttal to this is home ownership a mortgage is debt and is also a 'single purchase' however for most people, a mortgage is their first step towards financial independence. The next concept of course is TVM (time value of money), having cash available now to invest in worth more than later, and so utilizing leverage to invest money is important.
Generally, investments that beat interest make it worth it to utilize debt to make them, this is the premise behind investing using margin, utilizing heloc loans, or taking out a loan for a business, education, or tooling that will allow you to earn more.
Debt isn't inherently bad and there are many ways to use debt to your advantage.
A good way to look at it is like this, if you have a line of credit available to you that satisfies your emergency fund, let's say a few thousand dollars, instead of sitting on the fund in a low interest savings account, you can move that to something marginally less liquid, like an REIT or an index fund, and use the line of credit to float cash until you can withdraw. Use the credit for the 4-6 days it takes to clear the transaction. You may pay some interest, but the emergency fund will have actually gained significantly more than any interest you would pay.
Not all investment is the same, buying out of the money long calls on mene stocks is not the same as moving medium or long term savings to high dividend managed funds.
Thanks for providing the additional clarifications, I think pretty much all of it is valid, I just have a slightly different perspective.
Most people would likely agree with you that investing into a home through dept is reasonable. I don't disagree.
I also agree that you can utilize loaned capital in a way that your earnings outperform the debt incurred.
You're still gambling though. You can not afford to lose your home, or that loaned capital. Maybe you feel like your chances are good, and maybe they really are, but you're relying on your personal prediction of the future to ultimately resolve that debt.
A "real" investment is just as much gambling, but the fallout from failure is entirely different.