| Do you want to live a debt-free life? |
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littleroc02us
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[quote="oldguy"] quote:
quote:
You have to remember that although Old Guy was successful with his risky approach, a lot more people do fail.
This is true, I witnessed it first hand. But the common error wasn't the approach, it was NOT following the approach - most failures were due to lack of patience, lack of conviction, selling in a market crash, then holding cash until the market recovered, and buying back in. It takes patience to become rich. 
What I meant was that you didn't lose your job and have to fall back on credit cards because you leveraged so much or have to cash out retirement funds to survive or you didn't become disabled god forbid. These factors can lead to many problems the more riskier the approach. (Again meaning one who borrows and leverages to invest vs. someone who has no debt and lower risk)
Risk comes from not knowing what you're doing. (Warren Buffet)
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Mon Apr 02, 2012 7:54 pm |
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fast
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quote:
Originally posted by littleroc02us
(Again meaning one who borrows and leverages to invest vs. someone who has no debt and lower risk)
I see your point, yet at the same time, I wouldn't cast out the borrow-to-invest approach entirely since it doesn't appear to have much risk associated with it when applied by people in certain financial circumstances. I don't know enough about financial ratios to articulate the idea that's on my mind (about how a person’s financial health is a major contributing factor in assessing a part of the risk that comes with being leveraged), but if, for example, you're debt free except your house and can borrow an additional $50,000 on your house and still have five times your mortgage balance invested in (oh say) an S&P 500 index fund in a taxable account, then the risk factor (for people in such circumstances) is nearly insignificant, as the risk associated with being leveraged can be solved in the blink of an eye. In other words, risk need not be regarded like a light switch that can turned on or off by choosing to leverage or not leverage; moreover, it can be regarded (I’m speculating) like a dial with graduated levels of risk; hence, there is, more likely than not, (I would like to think) sensible room for debt in our financial lives.
Dave Ramsey talks about how he filed bankruptcy, and he talks about how he was leveraged, but he was (obviously) dangerously leveraged, but to fully attribute his downfall to merely being leveraged is questionable, especially since there are varying degrees of leverage.
I will say this though. It seems mighty dangerous (or at least comparatively dangerous) for a young couple with no bailout nest egg in sight to embrace a full steam ahead, borrow-to-invest approach. But then again, what do they have to lose? We have one life, and playing it too safe may ensure that they won’t soar high. I don’t know. There’s just so many factors to consider.
I just don’t think that advocating a “just say no to debt” philosophy is the optimal approach, yet enough can’t be said about the need to treat it like a weapon that we can hurt ourselves with.
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Tue Apr 03, 2012 1:19 am |
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littleroc02us
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Cash: $ 384.35
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I understand your point of view, but we will just never agree on what the use of debt is for and our philosophies are different when it comes to leveraging vs. not .... So, I cannot advise someone to go about their finances in with such a method. But that's o.k. because this forum would be quite boring if everyone all had the same point of view. 
Risk comes from not knowing what you're doing. (Warren Buffet)
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Tue Apr 03, 2012 8:40 pm |
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