How To Guarantee An 8% Return
This article really has little to do with dividend paying stocks, but it does have to do with risk management and how I guaranteed myself an 8% return risk-free.
The Nuts and Bolts
The real truth here is that there is no magical formula and I am not pitching a complex investment program that claims outlandish results that will have you bathing in money in no time flat. However, I am going to show you my my simple logic that lead to getting this guaranteed 8% return.
The “Secret”
The secret is that 8% was the rate of interest on my student loans. What does that have to do with investing? Well, by completely paying off my student loan debt, I effectively guaranteed myself and 8% return on my money without any risk, not accounting for any tax consequences.
How does this help you?
If you are wondering where to invest that little year-end bonus or that extra little bit of cash each month, consider paying down some of your higher interest debt. Other than your mortgage (USA), most other debt is not tax deductible.
If you have debt with an interest rate in excess of 8%, you should seriously consider that risk free 8% return very valuable. Not to mention the peace of mind that lowering your financial obligations to others brings.
Can you guarantee yourself an 8% return on investment?
5 Responses to “How To Guarantee An 8% Return”
By noah kagan on | Reply
Not sure if you can guarantee it but high yield municipal bonds or corporate debt offer decent rates…
By Tyler on | Reply
Municipal bonds, while often tax advantaged, do carry more risk and in turn should offer a higher return.
Thanks for the comment Noah,
Tyler
By Adventures In Money Making on | Reply
of course, if you have a much higher debt payment, say 15% on a credit card, you can get an even better return!!!
By Tyler on | Reply
Adventures,
You are correct. Debt payment is a guaranteed return on investment. However, the object is not to get inot those situations in the first place if at all possible.
By Mike on | Reply
How did you manage to get your student loan interest above 3%?