Two years ago, I consulted a financial advisor at London Life (Canadian provider of life and health insurance) as my investing knowledge at the time was very limited. I was advised that since I carried no debt, the best way to make money would be using leverage to invest. The plan was to borrow $100 000 at 3.5% interest and invest it into London Life segregated funds chosen by my advisor. It’s been just over two years now, and the account is currently at $103 000. So I’ve paid $7000 in interest, but the fund value has only grown by $3000.
Obviously, this hasn’t been a good investment strategy. I’m just not sure if I should call it quits now before I lose more money or if I should wait for the fund to increase in value. The investment was started right before the price of oil dropped (November 2014), so the timing wasn’t great as I was initially invested all in Canadian equities. The fund was at a low of $88 000 at one point, but has since recovered. The investment is now more diversified with 40% in global equity, 40% in Canadian equity, and 20% in US equity. Any suggestions or advice would be greatly appreciated. Thanks.
i think ur adviser did a half his job, borrowing at low rates can be attractive to fund investments if u know the odds are high and personally if u knew ur self what ur doing where the loss is minimized, lastly how much of ur income does the 3500 a year represent, cuz sometimes the best investments are not available immediately, so borrowing at a low rate might be good if u know to invest it at a higher rate and u might have to absorb the interest for few years if that opportunity is not,
the big question is whats ur investments experience now? is it still limited or is it much better?????
if limited i would close out the investment right away, cuz what would happen if its at 80k instead of a 100?? can u afford the 20k loss???? how did u feel when it was down to 88k???? did it shake u or is ur networth/income larger where it wasnt the issue, u must take these factors into account,,,
borrowing at 3.5% is awesome which not everyone has the access to it,,, but only if there is a good use to it with great confidence and limits to losing (as in whats worse case scenario),,,,
i used to do something similar to this back in the days borrow at lower rate to invest at higher but my experience was limited back then and i got hammered, the only thing that kept me afloat is the fact my income from my current job can dwarf the amounts i took and i recovered,,, but in terms of borrow low invest high i miserably failed, at least back then
there is been times i also borrowed to invest but when i didnt find anything good use for it and i paid back the money and ended up losing on the interest for the 7 months i had the money,,, point is dont force the trade(investment)
