Saxo Group
When using money doesn’t make sense
If you’re like us, you’d like to reduce your tax bill as much as possible. In many countries, there’s an income tax deduction for mortgage interest. Let’s say your mortgage interest for the year is $1000 and your marginal income tax rate is 35%. You are able to deduct the $1000 in interest payments from your income, so you don’t have to pay the 35% or $350 in taxes on that portion of your income. You have effectively spent $1000 to save $350. You have to pay your mortgage, but this is not financially ideal. If you have the option, you should avoid spending $1000 even if it means you will save $350.
We want your business
To be perfectly honest, we want your business. After all, it is one of the ways we make money. At the same time, we only really want your business if it makes the most sense for you and your personal situation.
The sooner you start the better
All things equal, the sooner you start investing the better. The more money you have the more your investment will grow. The more time you have to invest the more your investment will grow.
Your financial big picture
If you have determined what you have of value (your assets), what you owe (your liabilities) and what your net worth is (the difference between the two) as we discussed in this article, you have a nice view of your financial big picture.
Prioritize
Yes, we want your business. And, yes, the sooner you start the better. However (the big however), maybe you have a smarter option. let’s suppose you have the following:
Assets
- A basket of stocks growing at 7% a year
Liabilities
- Student loans with 8.75% interest
- Mortgage with 3.25% interest
You should prioritize how you use the extra income you have to invest or pay down debt. In this case, you should prioritize paying off your student loans over investing more in your stocks, which you should prioritize over paying off your mortgage. For every $100 you spend, you will reduce your student loan interest by $8.75, grow your basket of stocks by $7.00 and reduce your mortgage interest by $3.25. If you have the option, you should avoid paying $8.75 in interest even it means you will lose out on $7.00 in stock growth.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist