Is Bad Debt Management Hurting Your Investment Returns in the Stock Market?

We aren't taught that debt management is a part of stock investing, but it actually is -- all of the different decisions in your financial life are interconnected. Obviously, your loans can't impact how much a stock's price rises or falls. However, mismanaged debt can drastically reduce the amount you have in your stock portfolio down the road. And the best possible debt management strategy isn't as simple as avoiding it altogether.

Capital allocation decisions carry opportunity cost. You have to decide what you do with every single dollar you save. If you pay down debt, you miss out on the returns you could have been earned by investing that money. If you purchase stocks while carrying debt, you incur interest on the balance that you could have avoided. These factors need to be considered if you want the best possible financial plan.

The decisions you make around loans have ramifications for the amount of cash available for investment. When all aspects of your financial plan are acting harmoniously, it helps you avoid emotional decision making, such as taking on too much risk to chase returns.

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Source Fool.com