Experts warn against gearing after interest rate cuts

As the country anticipates that the Reserve Bank of Australia (RBA) will enact a sixth cut to interest rates in as many months, financial experts have warned against taking out a loan to invest.

Speaking to the Australian, financial gurus insisted that taking out a loan to play the stock market should only be considered by those with a stable job, steady income and a lot of time to iron out their investment strategy.

The Financial Planning Association’s Kerrin Falconer pointed out that many Aussies have already been burned by racking up debts on the hopes of winning it back on the market.

He warned: “The investor has to realise that it is a high-risk strategy. The worst-case scenario is when the investment completely hits the dust and you’ve still got the debt.”

The Australian reported that many people are considering the strategy as a way to get the most out of the interest rate cuts enacted by the RBA.

Experts are widely expecting another sizeable chunk to be lopped off the base rate, adding to the 400 basis points which have been cut since September.

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