Paying off debt vs. investing? This can be a hard decision for some. Good evening this post will be a little different from past posts. Given our current status here in Canada with the federal election results I personally think it has helped inflate uncertainty in our country. So for that reason alone I have decided to sell some assets in my TFSA. Those assets were +1% yield compared to the interest I was paying on debt commitments. But I feel that 1% is not enough to “gamble” with given the current market. So for me paying off debt vs. investing in this situation makes the most sense.
Everyone that wants to invest when they have debt needs to weigh out the gap or difference between what they feel reliably their investments can give them versus what they currently pay on debt commitments. And this also is where a person can not let emotion sway them, write down your risk/reward plan and stick to it. For me its 1% difference as I still have quite a few years of wanting to have my money in the markets. As I get older that % will probably go up as I lose some appetite for risk. If you find your self waning, wanting to stay invested if it doesn’t meet your tolerance just remember that it is like getting dividends back to you. When you payoff revolving credit that will be interest you are not charged that will be back in “your pocket” so to speak.
Definitely it goes without saying that if you can not make in dividends or reliable gains in the timeframe you need versus what your are paying in interest on a debt commitment, the answer is a lot easier pay down the debt.
