What is the best financial investment possible? Who invests to monetize your money the best way and it is fundamental that you can find the best investment. But how?
The answers are varied: some say that it is best to invest in land, others say real estate, art, gold, etc. As a general rule, we seek profitability with little risk. But this is difficult because risk and return on investment are always correlated. If we want higher levels of profitability, we must be subject to greater risks.
I am not saying that the previous examples are more investments, but there is a type of investment that we rarely remember and that combines high return and zero risk! It seems impossible, but it is not.
I am referring to the option of divestment. That is, use cash to repay our credits before the deadline. If you have some money and want to apply it in financial products, before analyzing the market offer, check how much you are paying interest on your credits.
Note that you are likely to have loans with interest rates of around 10% and if you can anticipate repayment of these installments by, say, 3 years, you will no longer bear this 10% interest payment per year for the next 3 years! You will hardly find a financial product in which you withdraw yields of this order of magnitude (perhaps the best you can find on this day, without risk, be the capitalization insurance or some PPR, but even those with rates lower than 2%).
Of course when we are talking about the debt, we are referring to a future “non-payment”, that is, you are freeing yourself from a charge. If it was a real investment, what we would be talking about was receiving an interest payment. But even if the order is reversed, the financial logic is that it is important. What is the point of seeking to invest in products at risk, when we can, without any risk, have a “no cost” of 10% (or more) per year?
It is true that in many loans has an early amortization rate, but even this cost is irrelevant to the gain I am referring to. This logic applies to those who have credits with high interest rates, because in the case of products such as Mortgage Loans it may not make sense, financially speaking, to repay instead of invest. This is an analysis that will be done on a case-by-case basis.
Always bear in mind that when we speak of investments the popular expression “if the alms is much the poor distrusts” applies with great clarity. When the potential return looks very good there might be some information that is escaping. Risk and return are always associated. If we forget this we end up having a terrible experience.