“Going into debt to invest” is an idea that has been sold as a winning strategy for decades by a certain type of pseudo-financial literature.

A kind of literature that profits from people looking for shortcuts because they believe they are smarter than everyone else.

They want to make money without working.
They want to save without earning.
They want to invest without saving.

In this article, I want to explain why these people are destined to fail along with their flawed ideas — and who, instead, is likely to prosper even during difficult times like the ones we are about to face.

Enjoy the read.

The Illusion of “Smart Debt”

John Doe #1:
“I’m thinking about taking out a 100% mortgage to invest in a property and then rent it out.”

John Doe #2:
“I’m considering taking out a loan to install a photovoltaic system and start selling energy.”

John Doe #3:
“I want to buy a house. I already have all the capital available, but since investment X yields 3% while the mortgage interest rate is only 2%, I’ve decided to invest the capital and finance the house with a mortgage instead.”

John Doe #4:
“Investment X delivers an average annual return of 4%, while the cost of financing is just 2%. I’m thinking of taking out a loan to start investing in stocks.”

All of these statements have one thing in common.

In all four cases, debt is being used to invest.

Let me be very clear: erase this kind of thinking from your mind immediately.

These are exactly the kind of flawed ideas that have led — and will continue to lead — thousands of retail investors down the path to financial failure, right alongside you.

And now I’ll explain why.

Borrowing to Invest: The Road to Financial Failure

One of the most prominent supporters of the “borrow and invest” mindset is undoubtedly Robert Kiyosaki (followed over the years by countless low-quality imitations around the world, Italy included).

If you don’t know who Kiyosaki is, it’s enough to know that for over thirty years he has been promoting ideas such as:

• Use debt to buy real estate that generates positive cash flow
• Don’t keep too much liquidity in the bank because of inflation; instead, use it for down payments and take on even more debt to buy property
• Use credit cards to build a credit history so you can increase your borrowing capacity

These are the more strictly financial recommendations. Beyond that, there is an entire part of his narrative devoted to network marketing, “passive income” from trading, and other misleading promises aimed at naïve beginners or financially frustrated adults.

Let me be clear: I have no interest whatsoever in the person himself. I don’t care about his companies, how many copies he has sold, or his personal brand.

I am simply pointing out the harsh reality of what has been promoted for the past 30 years.

What I want to do here is a technical analysis aimed at evaluating the actual results of these ideas.

And I believe I have more than enough grounds to do so without asking permission from Kiyosaki’s fans.

The Puzoy’s Analysis

Let’s go back to his so-called “financial” advice, which can be summed up like this:

Borrow money, don’t hold cash, and pay everything in installments.

Truly brilliant.

Debt, no cash, and a lifestyle beyond your means.

How did I fail to realize that these were the keys to a dream life?

That said, I want to spoil something for you right now: I’ll tell you who will actually profit from all this—especially from now on—by snapping up the investments of Kiyosaki’s followers (investments made using debt).

But let’s take a step back for a moment.

During the COVID-19 pandemic, we clearly saw how the world was desperate for liquidity due to the imminent recession triggered by the health emergency.

Faced with that uncertainty, everyone wanted liquidity.

“Cash is king” was the slogan of the moment.

And do you know who was looking for liquidity more than anyone else during that period?

Those who were in debt.

Because debt is the exact opposite of savings and liquidity.

Debt is certain, and its repayment does not allow for postponements.

And guess who will be forced to sell—quickly and at fire-sale prices—their properties and other assets just to raise some cash?

Those who went into debt to buy those very same properties and assets.

And guess who will buy them for pennies on the dollar?

• Those with no debt
• Those with plenty of liquidity

Do you now see how so many people have ruined (and are about to ruin) their financial lives by following these reckless ideas?

Do you see how borrowing and investing are the exact opposite of each other?

Never confuse investing with borrowing.

Investing preserves your wealth or helps you build it (and I say helps—real money is made by building businesses).

Debt makes you poor.

Analysis of a Winning Financial Choice

If you’re wondering what the alternative to going into debt is, here’s the answer—plain and simple:

• Earn as much as possible through your work (as an employee or self-employed)
• Save
• Invest
• Earn from your investments

Easy to say, certainly not easy to do.

It’s not thrilling.
It’s not motivating.

It’s boring—I agree.

But saving in order to invest, and even more so saving to achieve your investment goals, is the ONLY real secret (which isn’t really a secret at all) to improving your financial life.

PLANNIX clients know exactly what I’m talking about.

Thanks to proper personal finance management, they are ready to face a potential recession with complete (financial) peace of mind.

Everyone else, on the other hand, will go bankrupt with alarming ease.

Paraphrasing Kiyosaki himself: don’t waste mistakes—learn from them.

So why not start learning how to manage your personal finances properly right now?

Why not learn how to invest in a disciplined and effective way starting today?

If you don’t know where to begin, my suggestion is to start by joining our Facebook group Puzoy – Investing and Personal Finance, the leading personal finance community dedicated to individual investors.

And if you truly want to learn how to build a solid financial planning strategy, Puzoy is the complete, practical process that teaches you how to invest, manage, and protect your money with total independence.

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