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The Wise Investor

Once again, only include items that will increase in value.
Loans that you take out for a car, boat or other leisure and
personal items should be ignored.
They are not part of your investment strategy, they are
part of your spending and your personal finance.
As we spoke about earlier, loans for spending and
personal items should be avoided as much as possible. The
general rule is that if the loan is used to purchase assets that
rise in value, then include this loan in your description of your
investment portfolio. If you rent a home, then the process of
listing your investment portfolio is relatively straightforward.
You will have a list of assets that increase in value, and a
list of loans that were used to purchase them. Your personal
finances, which are separate from your investment strategy,
contain all the assets that decrease in value, and the loans
used to purchase those assets.
In your personal finances, use loans as little as possible.
Once you buy a home with a mortgage, however, the picture
may become a little muddier. Your family home may be
subject to special tax rules, and does not fall into the same
category as an investment asset or property.
Interest on investment loans in treated as a business
expense, and so is tax deductible. Income from investments
is added to your tax, interest on loans is subtracted, and you
pay tax on the difference.
The difference is your actual profit, the increase in your
wealth and the amount of money that you have available to
However, interest on the mortgage for your own home is
not tax deductible, which means that you have to pay the
whole lot yourself, rather than is being tax deductible.
The next result of this, is that if you have a very large
mortgage, then the best investment you can probably make
is to make extra payments onto the loan.
The quicker you reduce your loan, the more interest you
will save. There is a flaw in this strategy however.
If you channel all your savings into paying off your house,