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How Rising Interest Rates Impact the Cost of Your LAMF Strategy
Use pledged investments for lower-cost credit instead of expensive short-term loans.
LAMF is usually linked to a benchmark (like Repo Rate). If rates rise from 6.5% to 7.5%, your loan cost jumps from 10% to 11%. This narrows the "Spread" between your portfolio returns and borrowing cost. If your portfolio returns 12%, a 1% rate hike eats 50% of your net gain. Always factor in a 2% "Stress Buffer" in your interest cost calculations.