Tapping Into Home Equity

Q: So Jeff, if you don't recommend using a portion of your home equity for investment purposes, how do you tap into all that money tied up in your home without jepordizing it?

I plan on retiring from my day job hopefully in the next five years. I have a small nest egg and I have just recently started investing in the Market on my own. I work for the state and have Public Employee Retirement Portfolio. I want to be set within the next five years. What more can I do?

A: The question of using home equity to fund investments really boils down to... risk. The books that suggest using the equity to invest in life insurance make it sound like a low-risk proposition. I don't believe it is.

In your situation, it sounds like you may be comfortable with risk and taking a higher level of risk may be the only way you can reach your goal in five years. Of course, the greater the risk, the lower the probability of meeting that goal.

The instruments you use may also impact your need to tap the equity. Options can be used because of their internal leverage. Regardless of how you invest, it's vital that you have a program and/or strategy that helps guide you decisions.

Your posted comments on this and other questions are welcome.
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