Don't Follow The Lemmings

Amanda has $150,000 in student loan debt. It's at 3.5%, and their investment professional has advised them to not pay it off and invest the money instead. Is he right? Dave thinks this guy is an idiot.

QUESTION: Amanda in Missouri has $150,000 in student loan debt. It’s at 3.5%, and their investment professional has advised them to not pay it off and invest the money instead. Is he right? Dave thinks this guy is an idiot.

ANSWER: If you could borrow $10 million at 3.5% in order to invest it in the market, would you do that? If not, then why would you follow this investment advisor’s advice? Would your husband borrow $10 million at 3.5%? What’s the difference?

Let me tell you what that example does when I ask that question. It activates where your investment advisor is being an idiot. What it activates is your risk meter. The advice he’s giving you does not take into consideration risk. It assumes that this drain on your life called the student loan does not bring risk to your life. If we can borrow money at 3.5% and invest it and make 12% on it, what kind of idiot would not do that to the tune of $80 million or $100 million? We would do it. The problem is that when I ask it with a bigger number, it makes you realize that there’s risk, because you go, “Oh, no!” That activates the risk meter in your life. But the $130,000 wasn’t enough to move the meter. It didn’t move the needle.

This is wrong. This guy’s wrong, and he’s wrong for two reasons. One is he’s doing what every idiot in that business has been trained to do. Everybody does the same thing. Nobody thinks different. Nobody thinks for themselves. I was one of those idiots. That’s how I know. I’m calling myself and everyone else a bunch of lemmings. They all do what the other one does except for the few of us who don’t. He’s doing whatever the training was, and he doesn’t take into consideration risk. I disagree. If I were you, I’d get a different investment advisor. I don’t like yours.