Debt May Not Always Be a Bad Thing

BOSTON (TheStreet) -- Debt has become a four-letter word. Americans, shocked and shamed into a new frugality, are paying off credit cards and shunning new financing.

This well-intentioned trend may not be as prudent as it seems, says Morrison Creech, head of private banking and executive vice president for Wells Fargo Private Bank (WFC) . Creech touts taking advantage of historically low interest rates to improve liquidity, diversify portfolios and mitigate risk.

"You can look at debt in two different ways," he says. "One might be lifestyle-related, where you are using debt to finance a home, a second home or something that enhances your life. Then you've got strategic debt, which might be debt that could be used to purchase investments, maintain your liquidity and existing investment portfolio and, in essence, allow you to stretch out a little bit, but still participate in the great market we see ahead of us."

Investors need to carefully review their financial plan, Creech says.

"Do you feel pretty good in terms of how you've positioned yourself in terms of having a liquidity number that allows you to sleep at night and handle any emergencies and near-term needs?" he says. "When you look at the rest of your balance sheet, have you been maybe ultra-conservative given the events of the last two or three years, or might you have room to leverage part of your balance sheet and continue to diversify your portfolio?"

Creech uses the example of a corporate executive with "a huge amount of his or her net worth in the company that they work for" through stock options and equity grants they have accumulated over the years.

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