For anybody who has spent some time investing in financial markets (e.g. stock markets), you’ve surely wished from time to time that you could see into the future; to have some kind of crystal ball with which to tell if a certain investment will provide a decent return or not. I remember my first market loss was when I invested in Krispy Kreme back in the mid 2000’s – just days before the SEC announced an investigation. The stock tumbled rapidly. What a horrible feeling that was! Now, whenever I’m staring at financial charts I can’t help but wish there were a way to expand that chart a little further to see into the future!
If you recall from the book, in Chapter 6 (“Principle 4: Money Seeds Money”) we discuss debt and I ask you to consider getting (and staying) out of debt as an investment. Freeing yourself from those obligations is the first step towards having funds that you can invest in financial instruments to grow your future. So taking those steps to get out of debt is indeed beginning your future of investing.
For those considering taking out any kind of debt, consider this… debt is a guaranteed, negative investment. It’s a 100% guaranteed losing “stock.” When you take out a loan, for any reason, it is the same as having a crystal ball with which to see the future of an investment. Consider this… on October 19, 1987 the Dow Jones Industrial Average (DJIA) dropped a whopping 22% in a single day! Let’s pretend that the day before, on the 18th, you were considering investing in an index following the DJIA. If you could foresee 24 hours into the future to witness the 22% drop in value, would you have made that investment that day? Probably not! Considering just the short term, it was a guaranteed loss!
Taking out debt is doing exactly that – making a bad investment. The fact is, when you take out debt, you CAN see the future for that money because it is written into the terms of the loan agreement. You can see, with absolute certainty, that you will be losing money on that investment.
With this perspective, be very careful before taking out any debt, whether that be credit cards, car loans, or any kind of personal loan. Carefully consider the fact that your money put into that loan is a definitive loss. Debt should always be a last resort and never a first resort, as it always pulls you further to the left on The Money Curve!