How To Make 36% Return Risk Free

wow...great method john..keep going

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Sage advice John, I have been in the investment business for a long time and it always amazed me that people were stoked with 10% potfolio returns when they had not paid their cards off....

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This post of yours forced me to think again.

Certainly this one can be a baby of a sharp mind like you.

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That's what I'm saying man! I tell my brother this but he's stubborn! I have only a 12k limit and I have no balance! I pay it off as soon as I get home and transfer my funds over! Yeah...only 12K limit...but hey...it's pretty good for a college student man!

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I read this post but still I could not find the answer to "How to make 36% risk free return".

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But let's not forget the concept of good debt and bad debt.

True, credit card debit at 18% is BAD debt. But not debt is bad. An example of Good debt are the 4.25% mortgages being written today. I would make minimum payments on a 4.25% mortgage. Whatever extra cash would have been going to extra payments could be invested in assets paying a higher return (like SPDR ETF should do over the next 2 years).

The real trick to getting rich is borrowing money at a lower rate than you can get putting it to work. Once you find that, just keep repeating it.

Very good advice.

Next time I moan about paying off my credit card bill I shall remember this. :P

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Grat post, I hope it works :) I will try it!

I have credit cards and i never leave any debt in the end of every month. This doesn't mean i earn 36% per annum, it can only mean that i never lost my money by paying it (the interest) to the banks.

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That makes a lot of sense. Too bad I don't have any money to invest so I can not invest and pay off my debts.

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I have a card, but am afraid of taking risks. So I think investments wont really work for me. :p

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you had me going there for a second, no credit card debt for me

I am going to say right now, math is not my strong suit. I read what you are saying, and you are probably right but I can't figure out the who's and how's of it all. But right now we have one small credit card balance (less than $500) and other than that we are strictly cash and carry. We have the CC for incidentals, emergency, and such.
It is great advice though to get out from under the credit card, thanks John.

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Awesome post and very true! Love it! Thanks for bringing me a new thought.

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I do have credit cards, but I am almost to finish my debt. Now I work online only. SO I need them a lot.

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I don't have credit card debt. What can I do to earn 36% risk free?

Technically, paying off your credit card isn't risk-free because it reduces your liquidity. Yeah, you have no more debt, but you also have no cash, which is a risk in and of itself. So we'll call it "nearly risk-free."

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Spot on John. But the only place you were wrong was in the assumption people will do things based on "common sense". I am guilty as well often times but human nature is very powerful and often trumps common sense.

Americans love to buy stuff on credit cards and banks are more than happy to lend, so who cares?

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I am the person who is afraid of risk because of the limitations that I have, your articles and I highly Conference

ah... but what about the low interest cards? The ones that give you 0% for a year? How about the concept of just running up the bill, paying the minimums, and keeping the money you would have spent in the bank? This way, you get a free loan from the credit card companies, and you can make some interest from a bank like ING direct or something. THey may only pay 3%, but you can turn a profit on a free loan.

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I absolutely agree. It just doesn't make financial sense to invest in stocks or any kind of investment that doesn't yield more than the %APR on your credit cards.

Before I invest anymore in the stock market, I'm going to finish paying off my credit card debt.

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I'm going to get a credit card but the problem is that I don't have a document to provide since I work at home.

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Just a thought. If everyone who owns stock and holds credit card debt sold stocks to pay down their cards, how low would the Dow go?

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Good advice, but practically impossible to implement especially in these hard times.
Good post

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You shouldn't have credit card debt. That is the first thing you should try to clear. There are too many people with credit card debt in this country and it is sad. They are living to pay off their debt instead of just living. Greg Ellison

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Doh, so obvious, still some people don't get it. Take my aunt for example. She has like 30k debt, still she keeps a 10k investment which offers her like 3%. Countless times I told her the maths of this and she keeps denying it and instead keeps paying interest for her loans. I'm at a loss.

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I quite agree with you. It doesn't make sense having a negative credit card balance and having investments in shares, stocks, etc that wont yield double or more interest rate on your credit balance.

Nice post.

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after this post, it still sounds impossible.

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This is Amazing way of Return on your investment. But how about the people who are in Higher Tax bracket. Credit card purchase is a kind of temptation when one is doing shopping. I always make sure that i pay Credit card bills on time in order to get buried under Debts ..lol

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You're absolutely right. However people need to understand their personal spending habits.

If you're the type of person who has been saying for 10 years, "ya I'll start saving next year" then you probably never will. If that's you, start saving now, no matter what...even if you have credit card debt. Put money into a 401k or an IRA so you're forced to leave it alone.

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Amen to getting rid of the debt. We paid minimums just long enough to get a little cash saved up so we could handle emergencies without using the cards. Now, every extra dime goes to paying them off.

Makes perfect sense. I've never had a credit card debt even though I use it to pay all my bills and for as many purchases I can. The trick is to pay off the balance before they charge you interest. This way the card works for you and not the other way around.

John, if I may make a suggestion that may possibly increase the amount of comment on your already busy blog. As a personal favor to an Aussie blogger, could you possibly install a 'subscribe to comments' plugin so that I, and anyone else who is interested, can be notified when someone has added a new comment?

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Oh My God i have not have a credit card so that i can not invest.Really bad news....

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I still remember few posts you did a while back on proper usage of Credit card. I followed your advice and now pretty pleased when looking at my statements :)

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John, sometimes your posts are so painfully obvious and very funny. Your logic makes complete sense. The very reason the U.S. is in trouble is because people over leveraged themselves in every aspect of their life--> credit cards, mortgage, home equity line of credit, personal loans, etc.

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i wonder how many readers are in the 50% tax bracket.

also, as amazing as it is, some people do have a CC balance, but are paying it off via their investment profits. A friend of mine is/was in 10K debt but managed to execute some strong trades and has cut that debt in half by selling portions of his portfolio and it makes monster returns. Remember, 17% CC interest is per year, so if you can make more than 2% interest monthly, you are still ahead. Its not a wise move, but many people do it and come up ahead. Esp if you have other expenses to offset any income you are making on the market.

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I agree for the most part, except, you are forgetting the close to free money in the 42% range with making sure you are maxing out your RRSP contributions each year.

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