I recently sold about 90% of my portfolio for a gain of +-1% and taking into account that i had that portfolio for about 3-4 months. Reason that made me sell is, I had a huge credit card bill and other things i wanted to do. My motive for selling so early and at a smaller gain is I have this belief that you can't invest when you have debts because it would be like taking two steps backwards in order to take one forward. So what i would like to know is, how many of you have done the same thing i.e. pay all their debts and then invest after having a nil debt? Is it a good thing or bad? Would you do it? Thanks
There are exceptions... for example: you have a property that you are renting out and your are offsetting that cost against the income - which also means you pay less tax; you have a business and the business entity is in debt. But investing while you have credit card debt, car repayments, etc... yes, you did the right thing! If you have extra money, pay that into the debt that has the highest interest rate. Keep at it until you are debt free. Then come and invest and become stinking rich. :-)
Firstly: never invest money in the stockmarket that you do not have (e.g. rent money, overdrafts, etc.) Caveat to this is manageable debt e.g. funds in access bond etc. Secondly: Always determine what your opportunity cost is i.e. if you can leave the funds in your home loan e.g. and it "saves" you 10% whilst your portfolio is only breaking even then the choice is clear - leave the money in the home loan. Your choice was 100% spot-on - the next time you get into the stock market get in with money you can afford and then you don't have to worry about the debt collector hovering over you. Good luck
Its all got to do with your cost of debt and your return on investment simply put if debt is costing you 12% per annum and you can get a return of 30% per annum from trading then it makes sense to trade. Quite frankly if you are not making at least 20 to 30% p.a. from trading then you should not be trading.
Thank you very much guys, when i get back i am going to invest in the unit trusts, cos i am a long term person. Will only play with about R5000 and also attend all the face to face classes and then from there will rethink if the market is suitable for me or not. Long term shares for the R5000 i have MTN and TKG.