Why Rich People BORROW Money 💰

Why Rich People BORROW Money 💰
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[epicx]

This channel always confuses me, because sometimes the advice is straight up pipe dreams and sometimes it’s really helpful easy to get skits like this.

[The_Darth_C]

I love how he says “sometimes”. He knows it doesn’t always work and isn’t out here trying to trick people into getting into debt

[VadersFortress]

I love these little sketches packed full of useful advice. A good addition to your regular content.

[petergriffin]

Sometimes his advice is good, sometimes not. But at the end of the day I like the vids every time because it’s funny seeing and old person do a skit.

[theonedanish]

Now I finally understand why they say sometimes debt is good.

[rangapalmtree]

I love how he explains it so its super easy to understand for all ages

[Dyllon]

Rich people also go into debt for large purchases for cash flow reasons. Selling 10M in stock all at once exposes you to a bunch of risk and if the asset being sold is isn't super liquid, the sudden sale affects the price. Instead, you can take out a loan secured by said asset.

[protojager]

Debt you can afford is like owing your friend a favor, debt you can't afford is like owing the mob a favor.

[forever_golfer]

But you can invest in a S&P 500 anyway without buying the $5 million house.

[BigDirector]

Oh boy the amount of people who are gonna get themselves into trouble.

[franciscomartino]

I kind of get why he says being in debt can be good, but honestly I rather invest my own money I feel like it's safer that way. I won't get in trouble with the bank if the investment fails, plus even if I do make less money I don't have to give some to the bank cause of loans.

[MXALOVE]

If you financed a 5 million dollar house and put the rest into the stock market (10%) It would've been worth 87 million after 30 years + you got a tenant to pay off the house for you so essentially you got a free house + 87M$ + additional rent during that time

Now imagine you have multiple properties and keep doing this

[VisheshSharma]

Then why do banks lend you money when they can directly invest in an index fund?

[loafofbread]

Well all i gotta say is respect youre elders

[Kanyesbigtoe]

This channel is super helpful for me, a broke college student. I was able to pay off my student loans today!

[halofreak]

I was literally talking about this today, get a loan, don't need to use all to buy a house, down payment use the rest as investment and have it help you pay the house

[VRitasium]

Errr, I don't think you can borrow 5 million to buy a house and use it in something else. If you borrow consumer credit you can use it in anything you want but the interest rate will be much higher than 2%.

[nickolascrousillat]

Maybe I'll try that with my left over student loans then. But the biggest issue is that there are heavy taxes when it comes to selling stocks for cash so you have to calculate when it would be the best time to pull out a certain amount.

[me-myself-i]

Problem is, the S&P 500 can go down a lot for long periods of time. The S&P 500 in Jan 2013 was at about the same level as it was in Nov 2007, and in the time between, it went down.
Although, you could hedge against this by having a portfolio with 50% long-term Treasury bonds which go up in value when interest rates decrease in a recession, and 50% S&P 500 which goes down in a recession. Then, you could sell whichever portion is up. And then you would still profit.
Or you could outperformed even more by putting the stock portion into an actively managed fund, such as Berkshire Hathaway or the Fundsmith Equity Fund.

[garhong]

The basic principle behind getting a lower interest mortgage for a house and investing the difference in a higher growth option is great on paper and can in fact work for some people. But this will not work for the majority of people, particularly those who work a normal job and aren't rich. That's because while the S&P averages ~10% per year since inception, over the long haul, there will be periods (measured in years, not days or months) where your portfolio will crash continuously every single day. This is also the period where you are likely to lose your job. This will put you in a position where you cannot afford your mortgage AND you will see your stock portfolio take hit after hit for months on end. The vast majority of people do not have the mental fortitude or the reserve resources to ride these storms out. And if you cannot, you will end up in big trouble.