Re:How I Think About Debt
by LouisSayers on Monday May 06, 2024 @05:57PM
(#40279979)
> Why is avoiding debt a risk averse strategy?
Note that they said avoiding ALL debt.
For example, my student loan collects interest at a rate of 2.9%. Therefore, it makes sense to maintain that debt if I believe (and accept the risk) of making an investment that pays back a rate of 10%.
Financially it might make sense to keep that debt, pay the minimum and invest cash into let's say an index fund.
If you have a hardline stance that you NEVER want any debt, then you are basically saying you're highly risk averse (at least when it comes to ending up in the negative).
Note that they said avoiding ALL debt.
For example, my student loan collects interest at a rate of 2.9%. Therefore, it makes sense to maintain that debt if I believe (and accept the risk) of making an investment that pays back a rate of 10%.
Financially it might make sense to keep that debt, pay the minimum and invest cash into let's say an index fund.
If you have a hardline stance that you NEVER want any debt, then you are basically saying you're highly risk averse (at least when it comes to ending up in the negative).