Is it wise to buy stocks if I have a mortgage/credit card bills?

[Frankieplus]

Hi everyone..

I have an investment property that I am paying off and I also have the house that I live in that I am paying off..

Not to mention a credit card bill that's just over $20k

As a general rule, is it wise for me to buy blue chip shares? Or should I just be putting every cent I can find on to the mortgages and credit card?

Now I know that it all depends on which shares, how many, how much return compared to my mortgage interest rates etc.. But without doing any calculations is it generally ok to start buying some blue chip safe shares or am I wasting my time?


-Frank

 

[springhill]

Re: Is it wise to buy socks if I have a mortgage / credit card bills?

Hi everyone..

I have an investment property that I am paying off and I also have the house that I live in that I am paying off..

Not to mention a credit card bill that's just over $20k

As a general rule, is it wise for me to buy blue chip shares? Or should I just be putting every cent I can find on to the mortgages and credit card?

Now I know that it all depends on which shares, how many, how much return compared to my mortgage interest rates etc.. But without doing any calculations is it generally ok to start buying some blue chip safe shares or am I wasting my time?


-Frank

Set the amount that you owe on your 2 properties first.

Mortgages, once you have them established can be used as a line of credit with a 'reasonable' interest rate compared to attaining a line of credit to trade/invest. I use my mortgage as a line of credit to invest because I pretty much have it covered

It is your credit card that is the issue. What is the interest rate on this?

On a full credit card with full privileges, you are looking at 15-22%.

A well established blue chip can pay a decent fully franked dividend - nothing in the 15-22% region. So now you must rely on your blue chip to outperform consistently in terms of a reasonably moderate-high rate capital growth.

I would not even look at the stock market until you pay that credit card off.

If you have no money to pay off your card, then you sure as hell have no money to gamble on stocks.

With all due respect this is one of the more frightening 'should I invest in stocks' questions that I can remember reading and I invest in the low liquidity micro cap area of the ASX so my risk tolerance is extremely high.ł

Please consider this as well intentioned, go away and pay off your credit card. Come back when you do.

If you have an investing itch to scratch, try paper trading/investing whilst you are paying down that card debt.

Only then, will you see what kind if trouble you may be about to walk into!

 

[qldfrog]

+1
pay your credit card/personal loam debt, I would also say pay your own not tax deductible morgage debt before investing anything on the share market, you can keep your investment propertyu debt , fair: it can be tax deductible..
and during that time, try paper trading and see how much you would win/loose initially and get an idea or risk/way to contriol the risk

 

[waimate01]

Never owe money on your credit card. Never.

The notion of doing things to build your wealth, like an investment property or buying shares, when there's a huge hole in the side of your vessel through which your wealth is flooding out, just doesn't make sense.

Erase your credit card debt, and make sure you can keep it erased before you consider investing.

Although some might suggest paying off your credit card using a personal loan, or whacking it on top of your mortgage, I feel that only covers up the symptom but doesn't treat the disease, and runs the risk of the cycle repeating.

Debt for unproductive things (the sort people put on credit cards - holidays, retail purchases, expenses) is *really* bad. Debt for productive things (like property and shares) is still bad - just a necessary evil at some times.

Debt-free and asset-rich - that's the place to be !

 

[pixel]

Never owe money on your credit card. Never.

The notion of doing things to build your wealth, like an investment property or buying shares, when there's a huge hole in the side of your vessel through which your wealth is flooding out, just doesn't make sense.

Erase your credit card debt, and make sure you can keep it erased before you consider investing.

Although some might suggest paying off your credit card using a personal loan, or whacking it on top of your mortgage, I feel that only covers up the symptom but doesn't treat the disease, and runs the risk of the cycle repeating.

Debt for unproductive things (the sort people put on credit cards - holidays, retail purchases, expenses) is *really* bad. Debt for productive things (like property and shares) is still bad - just a necessary evil at some times.

Debt-free and asset-rich - that's the place to be !

+100%

If there is a blue chip stock that consistently and predictably increases at a higher rate than interest on plastic, I have yet to see it. Therefore, owing on a credit card is an absolute capital No-No!
Owing on a mortgage for the PPOR is the next - slightly lesser - disadvantage. A share such as, say, Telstra, may just compensate for mortgage interest, as well as avoiding CGT - assuming one bought TLS a year ago.
The only defensible debt, IMO, is a low-interest mortgage on an investment property - provided the costs are offset to a reasonable extent by rental income. Otherwise, that, too, is speculating on future growth which may or may not happen.

 

[ROE]

if you large CC debt chance are you got cash flow problem..considered reduce your debt ..any type of debt..pay off higher interest bill debt first....

I know properties spruikers advocates take on debt debt debt, pay interest only etc ...

but this is a one way bet your asset price wont fall and you have sufficient head room to deal with unforeseen events.

I would advocate conservative approach and work on your cash flow and don't over leverage.

 

[li21]

I was in a similar boat..
I took all my investments, sold them to start fresh and pay down all my margin loans and credit cards.
Now what I have is mortgage(not for investment) and car lease.

I often wonder is sticking my money in an offset earning a guaranteed 4.75% (or whatever my mortgage rate is)
is a better bet than investing in something else that "may" outperform (and hopefully earn dividends)
BUT have to factor capital gains into it.
I don't have to pay tax on the interest i "save" in an offset account.

 

[willoneau]

Hi Frank , how did you go with that credit card?