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Originally Posted by Agamemnon
If you can borrow at 4%, and invest at 9%, it is THAT EASY. If you can't, you can't. Since I can, it makes a lot of sense. This isn't in 'fantasy-land' or 'dream-land' or 'young'un-land', this is in the real world.
Explain to me why borrowing at 4% and investing at 9% is wrong.
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well, there are a few scenarios to consider
1) you could create a cash flow crunch, which might make you incur debt at not so favourable rights, such as credit card debt
2) the investments are rarely guaranteed, so it might be 9% this year, but maybe 2% another year. if you arent skilled at the balancing act, it could bite you
3) overall though, if you know what you are doing, its a good ratio, but if you dont, it could be trouble
I think the most important factor is point 1 though, cash flow to service the debt. i suppose it comes down to how it is all structured, which comes to point 3, knowing how to do this to begin with!