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on March 19, 2013 10:50 AM

Now and then, someone asks me for this kind of investment advice: How can I get started investing in stocks and mutual funds that are risk-free and have guaranteed high rates of return?

Of course that makes me laugh hysterically, not only because there isn't such a thing, but more because someone thinks I am an investment advisor. I am simply not qualified to advise anyone on traditional Wall Street, stock market investing.

My investment advice is quite unconventional, but it makes so much sense you are going to be amazed.

First, let's agree that the reason anyone wants to invest is to increase their net worth by making their money grow. There are two ways to do that. You can increase your assets or decrease your liabilities.

If you have debt, your net worth will increase at the very same rate if you increase your assets or decrease your liabilities. Let's say you receive a $1,000 bonus, with which you buy shares in a mutual fund. Your net worth increases by $1,000. If, instead, you repay $1,000 of debt, your net worth still increases by $1,000.

RISK-FREE: Using the example above, let's say you bought ABC stock instead of paying off $1,000 of debt. Next month, the stock drops by 50 percent. Now your stock is worth $500. But if you pay off debt with that $1,000 and ABC stock tanks, it does not affect your net worth at all. That $1,000 "investment" in your debt increased your net worth without any risk.

HIGH RATE OF RETURN: Investing in your debt pays you interest equal to the amount of the interest you were paying on the debt. Really!

Go back to the $1,000 debt you paid off in the previous example. If it was a credit card balance at 18 percent interest, you were paying $15 in interest each month, or $180 annually on that debt if you were making only minimum monthly payments. Once you pay it off, you get to keep that $15 each month. That is your 18 percent return on the $1,000 you invested in your debt. That kind of return on investment is unheard of these days.

NO MINIMUMS: If you have an extra dollar, you can invest it in your debt. Not true of investing in the stock market.

It's not unusual for a mutual fund to require an initial purchase of $1,000 or more.

It makes so much sense if you have any money to invest, to invest it in your unsecured debt until it is gone.

Then what? Should you invest in your secured debts?

That's a question only you can answer. It is a conservative approach, but every benefit of investing in your unsecured debt holds true for your mortgage. Every dollar you invest in your mortgage puts you that much closer to owning your home free and clear. Once paid, it's yours no matter what happens to the economy or the stock market.

Mary Hunt is the founder of, a personal finance member website. You can email her at, or write to Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.

To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at

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