Should you clear your debts first and build emergency funds of 6 months before investing? Or should you invest small amounts like $100 per month in roboadvisors? - Seedly
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Anonymous

Asked on 16 Jun 2020

Should you clear your debts first and build emergency funds of 6 months before investing? Or should you invest small amounts like $100 per month in roboadvisors?

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In most cases, you should clear your debts first and the reason is simple. The loan interest rate is guaranteed while your investment yields only non-guaranteed returns.

Next, you should also have your emergency funds in place before starting to invest. This is simply because of its name "emergency". In times of need, will you be able to liquidate your investment portfolio readily? If you made a profit, then it is fine. What if you suffer from a loss? Will the remaining cash value be sufficient to meet your obligation?

Yes, I understand that such decisions lead to opportunity cost. Therefore, you need to make a strong and responsible judgement.

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