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What's the best advice you've ever received?
(sh.itjust.works)
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this post was submitted on 27 Apr 2024
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Asklemmy
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I'm sorry but what money are you talking about here? A loan with no interest?
Tbf I'm really not savvy in loans, but I mean any amount of money X that you have to pay back with Y% of interest in Z days. If you take that loan and you know an investment that will guarantee you (Y+1)% then you should borrow money. (That conclusion is of course completely neglecting risk management)
You are correct in your theory... In practice however there is no such guarantees, if there were, it would be a perpetual money making machine
Investment opportunities that guarantee a return will always guarantee less than the interest of regular loans. So unless you are a billionaire, there is no such luck.
In practice, regular investment like mutual funds average to x in the long run (10 years or so) but you'd never find a 10 year loan that does not require you to pay regularly and with accrued interest for that time, so it defeats the purpose of taking out a loan specifically for investing long term
And that's why interest on borrowed money tends to cost more than any guaranteed investment. Because otherwise the ones loaning would just take the investment themselves.