Traditionally, borrowing money to invest is used for a tangible item like an investment property or something with some security attached to it. Borrowing for an investment in this scenario has its advantages (which we’ll cover shortly), but what about borrowing to invest in cryptocurrency?
Well, there’s a few things worth looking at, but first let’s answer the question – can you borrow money to invest in crypto?
Yes, you could get a personal loan to get you underway, but should you? Here’s why we’d suggest you don’t and why a more stable investment is wise when looking to invest borrowed money …
The crypto market can be volatile.
When steep fluctuations in value can be impacted by something as simple as a tweet from a celeb, it reveals that volatility, and we should exercise serious caution.
Take for example a recent tweet from Elon Musk.
He mentioned Dogecoin (a cryptocurrency), saying “I won’t be selling mine”. The value rose 7% in just hours from $0.1107 USD to $0.119, but within days it was back down 4%, stabilising for a moment before falling again, ultimately ending 27% below its 30 day high of $0.1574.
Now, looking at the single coin value, the numbers may not look huge, but let’s look again. If you invested at the top of the 30day high, you’d have lost 27% of your money before the end of the month. Compare this with a property investment … If you were to lose 27% in the value of your property over 30 days, the world is probably ending.
It may sound like an extreme point, but it paints a picture of where there are dangers if you are considering borrowing money to invest in something like Crypto vs. property.
Borrowing requires repayment
Sticking with this scenario, you’ve just lost 27% of your money that’s locked up in crypto (not liquid cash), and you’ve got a loan that is charging you interest on 100% of what you invested. Those repayments (including interest), still need to be made. Can you afford to cover that if the investment never recovers? Or do you sell, having lost a quarter of your money in a few weeks and get stuck paying off the difference?
This is, in a sense, true for property as well, but in the case of property investment, you’re paying something off – something that ultimately WILL (most likely) increase in value over time and is also likely earning money to help with repayments via rent paid to you.
This means, part of your property repayments are made for you (rental income), and with the right strategy/property the future of your investment has little to no risk of falling as far as 27% and certainly not in the short term.
Unlike Crypto, property has the potential to reduce your tax payable, grow in value (massively if the last few years are anything to go by), and ultimately build you a nest egg or even set you up to continue growing a property portfolio through equity.
Sure, there’s stories of Crypto investors who’ve made millions, but it’s risky, tough to time and certainly not advised that you borrow money to follow it.
If you’re considering an investment and looking to grow wealth, we’d love to show you how property can be the building blocks of financial freedom. Speak with our investment specialists today on 1300 469 840 or send us an email to start the conversation.