The stock market isn’t the only place where people borrow to invest. Many people borrow to invest in other assets, hoping they will increase in value over the years. Here, we’ll look at two common options.
- Buying real estate. Many people think real estate is the best place to invest money. But this may or may not be true. From 1980 to 2005, Canadian equities rose almost 16% in value. Overall, house prices across Canada rose almost 11% in the same time period. So even though real estate looked like a promising investment in 2005, many experts argue that stock investments do better overall, at least over the long term. Learn more now
- Starting or expanding a business. Many people dream of starting their own business. But according to Statistics Canada, 25%of new firms created in the 1990s went out of business within the first two years of operation. Just 30% survived five years or more, and only 20% were still running after 10 years. That’s not a high success rate. Make sure you do careful research and develop a solid business plan before you invest your savings. Learn more now
Remember: Borrowing to invest in real estate or a business is a big commitment.
Loans are often large and take many years to pay back. Shop around for the best deal you can get based on interest rates, fees, and what you have to pledge to secure the loan. Make sure you have a plan to handle the payments, and the losses, if things don’t work out the way you hoped. Be prepared to walk away from a deal you don’t like.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.