facebookMing Feng (Seedly) stated that you should reduce your asset allocation equities to pay off your loan first. If you believe in Buy Term Invest the Rest, isn't it practical to pay little and drag out the loan over time for higher investment returns? - Seedly

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Anonymous

27 Feb 2020

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Ming Feng (Seedly) stated that you should reduce your asset allocation equities to pay off your loan first. If you believe in Buy Term Invest the Rest, isn't it practical to pay little and drag out the loan over time for higher investment returns?

Ming feng: asset allocation

Discussion (6)

What are your thoughts?

Bang Hong

Bang Hong

20 Jul 2018

Level 7Β·Sustainable Spender Specialist at Spender Bang

I would pay "little" and i think it is practical to drag out loan over time. The answer is obvious, I am seeing there is a gap which i can gain.

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Interests rate = 1.88% for housing loan

Investment return = 3-5% for a reatively conservative

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Instead of paying my loan, I will drag as long as the economy on my side. Monitoring every quarterly closely should be more than sufficient, rates wont go up overnight unless there is a crisis.

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There will be risks involved in this approach, but to leverage the "gap", yes it is worth it for me and many others.

Loh Tat Tian

Loh Tat Tian

27 Feb 2020

Level 11Β·Founder at PolicyWoke (We Buy Insurance Policies)

There are good loans and bad loans.

Good loans are those that even a high interest savings account can potentially beat the interest rates (anything that is 2.6% and below). You should stretch your dollar to invest those monies (as long as you can afford the cashflow for 1 year).

Bad loans are those that is above 4% p.a. this is because, even CPF SA (risk free) cannot beat it. Unless you are able to beat the interest, it does not justify to take that risk.

Debt/loan should always be get rid of ASAP. liability is not a pleasing word....

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