Loan debt vs Investment equity – Which is the better one?
If you are going to give money to your friend or cousin or any other family member, you are investing your money in loan debt. You are actually loaning your money to another person, therefore you are investing your money in loan debt. However, if you loan a huge amount of money to a corporation or any big institution, you become a shareholder of that company. If you invest in equity and get good profits on that you can use that money for payday loan settlements. Now, this kind of investment is known as equity investment and is considered to be much better than loan debts.
How investments help
There are various kinds of investments that may help you earn good profits; and if you are able to earn good profits, you will be able to use that money for various debt pay off purpose like payday loan settlements, credit card consolidations, repayment plan payments and so on.
However, if you really want to get good return s on your investment, you will have to have good knowledge on the investment vehicle you are investing your money in. So, if you are going to invest your money in loan debts, you will have to think twice if you want to earn profit. There are many disadvantages of loaning money to your family members or friends. You may not be able to take interest on that and you can even lose the total money. If you are really attached to the person you are going to give your money, it is better to give away that money to him or her.
In case of investment equities, you may be able to earn good profits. However, there are higher risks of investing in shares of a company. You can even lose your money if the corporation or business fails. Actually, which kind of investment is much better depends on the investor. If you think that you are ready to take along high risk investments, he may invest his money in equities.
However, if you don’t want to risk your money it is better to stick to low risk investments. Like if you have very less money, if you are going to retire recently, it is better to avoid investing your money in high risk investment vehicle like the equity investment. If you want to do good investment, you can consult an investment counselor.
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I have a web site where I research penny stocks and stocks under ten dollars. I am a astute value investor. I do not like the idea of loan dept its true that when you buy dept securities you are making a loan not investing in a business.
I think there is a time and a place for debt and a time and a place for equity. I agree completely with your assessment on loaning money to family or friends- in reality, you should just give the money, or if it is a particularly big loan (offering a private mortgage on a property, for example) have all the loan terms written in an iron clad agreement so that nobody is unpleasantly surprised for the duration of the loan.
That being said, when considering investments, sometimes it is better to buy the debt of a company for the express purpose of taking it over when they default on their debt. In that case, being an equity holder is a perilous position indeed! This sort of loan-to-own strategy doesn’t always work but it can be an effective tool in one’s repertoire. I hope to touch on precisely that strategy a bit in my upcoming article on Monday.
Warm regards
The New Value Investor
Investors like Warren Buffet often combine the features of debt and equity investing. He’ll loan a company money at a favorable rate of interest, but also get the option to convert this debt into company stock, if he chooses. He collects the interest, and has collateral to guarantee payment. If the business improves, and the stock price goes up, Buffet makes even more money by swapping the debt for stock. Great way to go, if you can swing it. Ordinary investors do something similar when they buy convertible bonds. See Best Investment