Withdraw from portfolio or take debt?. Which is a better strategy?

Q&A: Questions & Answers
1

Lets say we want to buy/upgrade a medium ticket item like a car. Now there are three options.

  1. Go for company lease
  2. Go for bank loan
  3. Fully fund from savings and portfolio.
    Now i don’t want to start a debate on which is better. there are a lot of calculators available. I think 1.) is the best option considering tax saving on emi/fuel/service etc. But the problem is that huge regular monthly outgo will create some psychological discomfort. and consider this. on a day when your portfolio is down by 2% or so, you will feel,i should have sold 2% of my portfolio and fully funded the purchase. So why not sell a fraction of portfolio ( say 2%) and fully fund the purchase?. for selling we can employ some strategy like equally sell 2% of all stocks in the portfolio. this way, you will not feel any difference. ( in any case, 2% fluctuation is common). I would love to hear from other experts views.
    (Note: I am not sure if i am posting it in the right section. sorry if i am not supposed to create a general topic like this).
2

Overcome the psychological discomfort… I interact with few people and lot of time they give same reason. I don’t know why they don’t want to overcome something which is wrong.

Second, if you can payback the money from your salary then you should not be worried about the taking 1 or 2 options.

Third, Car loan will be available at around 10-12% and if you are not sure if equity is going to give this much return then i think you should be out of equity market :)…

so overcome the psychological discomfort… and go in for 1 or 2.

Look for details into the company lease…at least in our case

  1. There is a buyback cost ( 10% of vehicle ) which we have to pay
  2. There is a higher road tax component in mahrastra on the company registration
  3. in our case its kind of least arrangement with the loan company… so anyway intrest components gets added to your cost of acquisition
  4. Perquiste gets added into your salary…

So please check what is really benefical between 1 and 2

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3

Just a bit on non-investment advice:
In case if you go with a car lease, please insist on getting a full depreciation insurance. The car lease companies contracts are drawn such that they are not liable to pay damages if the car is not usable after an accident but not a total loss ( usually the case). I lost a couple of lakhs because of this. Else pick one where they are liable to give you a replacement car.

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4

A little digression for fun. If, with 2% of your portfolio you can fully fund your car & assuming your looking at a decent car in 8-10L raise, how big is your portfolio :stuck_out_tongue: upwards of 5 cr :neutral_face:

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