The old adage of time is money is true, but the main principle that we must understand is cost of borrowing has two components: opportunity cost and transaction cost.
Cost of Borrowing = Opportunity Cost + Transaction Cost
Opportunity cost is a negotiable percentage that valuates the foregone profitability of not being able to invest the money somewhere else over the period of time of the debt. Transaction cost is the added resource cost necessary to facilitate the transaction of the loan.
Understanding the cost of borrowing for investing is crucial for evaluating bond versus equity decisions. With higher interest rates, the cost of borrowing is more expensive now rather than later which makes bond creditor investments (investing in public / private bonds) a better profit versus risk decision rather than investing in equity markets. Vice versa, lower interest rates makes investing in bonds a poorer profitability versus risk decision because the cost of borrowing is lower (and thus creditor returns are lower).
ETF (Exchange Traded Fund),
Stock Index Futures (aka Equity Index Futures),
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