4 ms·

But why spend a dollar to save ten cents? If you paid off your loans quicker the savings in interest will far exceed the savings in tax deductions and dependin

But why spend a dollar to save ten cents? If you paid off your loans quicker the savings in interest will far exceed the savings in tax deductions and depending on your rate of return in the market could even trump those gains.

dublinben 10y ago
If your loans are only at 3.5%, but you can earn 7% on the stock market, you're throwing money away by paying over your minimums.
- JumpCrisscross 10y ago
  > loans are only at 3.5%, but you can earn 7% on the stock market This isn't prudent asset-liability matching. If your loan is 3.5% and you can find investment-grade bonds that (a) yield more and (b) compensate you, in the spread, for your risk and hassle, then that might work.
  - sirakov 10y ago
    These comments are proof we've been in a bull market far too long
    - willholloway 10y ago
      Agreed, and a completely federal reserve fueled one at that. I remember how, with great fanfare, DOW 10,000 was ushered in. I was in 8th grade and it was 1998 or 1999, I remember how ten years later the DOW hit about 6,000. We do not know how capitalism will respond to competent robotics and AI, and a population bust.
- lettergram 10y ago
  Exactly right! My highest loan is 10% interest (private loan), average between all of them is 5.2%. My annual return on the stock market is always well above 10% YoY... sooo it's basically never worth it. Which is my point, the whole "we'll make you an indentured servant until you pay us back", seems stupid.
  - mywittyname 10y ago
    What happens when another 1999 happens with three straight years of 20-30% declines? Or a 2008 where there's a nearly 40% decline? It takes several years of double digit gains to recover from these declines, and both of those happened within a decade (and we are not even a decade out from 2008). Point is, investing v. paying off debt is not a simple matter of average expected growth compared to interest paid on loans. Investments often lose large portions of their value in the short-term while paying off debt is always a guaranteed return. So, for short loans (<15 years), it's probably not wise to use average expected return, instead use a wide range of +15%pa and -30%pa. I'd argue the fact that you've beaten the average expected yearly return for so long suggests that a correction is imminent and paying off debt has a better expected return than investing. This goes doubly because so many people have forgotten the lessons taught by past recessions and believe that 10%+ annual returns are the norm.
    - lettergram 10y ago
      > I'd argue the fact that you've beaten the average expected yearly return for so long suggests that a correction is imminent and paying off debt has a better expected return than investing. I wont even disagree, but my point is that it should be an option to do, versus money just being taken out of my pay check to pay a loan.
  - bogomipz 10y ago
    >"My annual return on the stock market is always well above 10% YoY" That would make you one of world's most elite money managers. I'm sorry but that sounds to good to be true. Bernie Madoff was getting his clients 10% year over year and that turned out to be too good to be true as well. Could you share some details on this investment strategy you have?
    - lettergram 10y ago
      First, I hold all my investments for a year then dump them (occasionally, I'll rebalance before a year). I've been doing this for 5 years, averaging 35% returns. I said 10% a year, because I'm assuming one down year I will "lose" significantly. I always do this in March, after my tax return, because that's my "play money". All the money I made from the prior years investments + tax return I usually dump into other investments that hold up over time i.e. gold, real estate, etc. or invest in my business. Here's this years, which has been unusually good: http://imgur.com/a/j8YWR http://imgur.com/a/j8YWR I pick the high movers using a method I'm not going to describe at the moment. However, I am making a website which will help others invest as I do. It'll be a paid service, but I'm not going to charge outrageously. You can follow on my blog, I plan to release it sometime in late spring: http://austingwalters.com/ http://austingwalters.com/ Feel free to follow me, and I'll send out an update when I'm ready to release the stuff.

dublinben 10y ago

If your loans are only at 3.5%, but you can earn 7% on the stock market, you're throwing money away by paying over your minimums.

JumpCrisscross 10y ago
> loans are only at 3.5%, but you can earn 7% on the stock market This isn't prudent asset-liability matching. If your loan is 3.5% and you can find investment-grade bonds that (a) yield more and (b) compensate you, in the spread, for your risk and hassle, then that might work.
- sirakov 10y ago
  These comments are proof we've been in a bull market far too long
  - willholloway 10y ago
    Agreed, and a completely federal reserve fueled one at that. I remember how, with great fanfare, DOW 10,000 was ushered in. I was in 8th grade and it was 1998 or 1999, I remember how ten years later the DOW hit about 6,000. We do not know how capitalism will respond to competent robotics and AI, and a population bust.
lettergram 10y ago
Exactly right! My highest loan is 10% interest (private loan), average between all of them is 5.2%. My annual return on the stock market is always well above 10% YoY... sooo it's basically never worth it. Which is my point, the whole "we'll make you an indentured servant until you pay us back", seems stupid.
- mywittyname 10y ago
  What happens when another 1999 happens with three straight years of 20-30% declines? Or a 2008 where there's a nearly 40% decline? It takes several years of double digit gains to recover from these declines, and both of those happened within a decade (and we are not even a decade out from 2008). Point is, investing v. paying off debt is not a simple matter of average expected growth compared to interest paid on loans. Investments often lose large portions of their value in the short-term while paying off debt is always a guaranteed return. So, for short loans (<15 years), it's probably not wise to use average expected return, instead use a wide range of +15%pa and -30%pa. I'd argue the fact that you've beaten the average expected yearly return for so long suggests that a correction is imminent and paying off debt has a better expected return than investing. This goes doubly because so many people have forgotten the lessons taught by past recessions and believe that 10%+ annual returns are the norm.
  - lettergram 10y ago
    > I'd argue the fact that you've beaten the average expected yearly return for so long suggests that a correction is imminent and paying off debt has a better expected return than investing. I wont even disagree, but my point is that it should be an option to do, versus money just being taken out of my pay check to pay a loan.
- bogomipz 10y ago
  >"My annual return on the stock market is always well above 10% YoY" That would make you one of world's most elite money managers. I'm sorry but that sounds to good to be true. Bernie Madoff was getting his clients 10% year over year and that turned out to be too good to be true as well. Could you share some details on this investment strategy you have?
  - lettergram 10y ago
    First, I hold all my investments for a year then dump them (occasionally, I'll rebalance before a year). I've been doing this for 5 years, averaging 35% returns. I said 10% a year, because I'm assuming one down year I will "lose" significantly. I always do this in March, after my tax return, because that's my "play money". All the money I made from the prior years investments + tax return I usually dump into other investments that hold up over time i.e. gold, real estate, etc. or invest in my business. Here's this years, which has been unusually good: http://imgur.com/a/j8YWR http://imgur.com/a/j8YWR I pick the high movers using a method I'm not going to describe at the moment. However, I am making a website which will help others invest as I do. It'll be a paid service, but I'm not going to charge outrageously. You can follow on my blog, I plan to release it sometime in late spring: http://austingwalters.com/ http://austingwalters.com/ Feel free to follow me, and I'll send out an update when I'm ready to release the stuff.