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Why would you ever want to pay off your mortgage? Mortgages are the best and cheapest way to get debt. Considering the rate environment, the rate risk isn’t a b

by smabie 7y ago

Why would you ever want to pay off your mortgage? Mortgages are the best and cheapest way to get debt. Considering the rate environment, the rate risk isn’t a big deal, IMO. Hell, I would even go a step further: dump that 200k into a levered S&P 500 (2x should be good). Unless the world falls apart, you’ll definitely be a millionaire in 10 years. And if you do 3x, maybe even 5 years (that’s some more risk though). I can’t really imagine a world in which the annualized yield of SPY over 10 years is less than 2.7%. And like I said before, rates are only going down and that’s not going to change anytime soon. Of course a financial advisor wouldn’t tell you to do it but they don’t really care about you in the first place.

charlesdm 7y ago
If anything, depending on the market the risk is that the house actually goes down in value.
Ididntdothis 7y ago
"I can’t really imagine a world in which the annualized yield of SPY over 10 years is less than 2.7%." Seems your imagination is lacking. From 2000 to 2010 it was negative. I wonder if the current market is the only market you ever have seen. Housing prices also have collapsed not too long ago in the past.
- smabie 7y ago
  You’re time period is very convenient, including two crashes and none of the recovery. That said, point taken.
  - Ididntdothis 7y ago
    Downturns in the market will kill you if you are leveraged. Once the money it's gone, it's gone and it will be hard to make it back. that is, unless you have a rich dad who gives you more money. That's why I think it's very important not to be naive with investment advice.
  - imtringued 7y ago
    That would match the behavior of a boomer liquidating his portfolio before retirement.
throwaway34241 7y ago
A 2x levered S&P 500 ETF will always be buying when the market is high and selling when it's low (the debt will end up less than 50% of the value if the market goes up, requiring them to buy more to maintain 2x leverage, and the reverse when it's down). So if the market doesn't move in a straight line you make less than 2x the S&P 500 return over time, including losing extra money in neutral and bear markets.
- smabie 7y ago
  Sure, check out my post: ETFs, Volatility and Leverage: Towards a New Leveraged ETF Part 1 https://smabie.github.io/posts/2019/10/04/vol.html https://smabie.github.io/posts/2019/10/04/vol.html The word you’re looking for is volatility drag. Even so, levered ETFs are a good investment for most investors

by smabie 7y ago

charlesdm 7y ago

If anything, depending on the market the risk is that the house actually goes down in value.

Ididntdothis 7y ago

"I can’t really imagine a world in which the annualized yield of SPY over 10 years is less than 2.7%." Seems your imagination is lacking. From 2000 to 2010 it was negative. I wonder if the current market is the only market you ever have seen. Housing prices also have collapsed not too long ago in the past.

smabie 7y ago
You’re time period is very convenient, including two crashes and none of the recovery. That said, point taken.
- Ididntdothis 7y ago
  Downturns in the market will kill you if you are leveraged. Once the money it's gone, it's gone and it will be hard to make it back. that is, unless you have a rich dad who gives you more money. That's why I think it's very important not to be naive with investment advice.
- imtringued 7y ago
  That would match the behavior of a boomer liquidating his portfolio before retirement.

throwaway34241 7y ago

A 2x levered S&P 500 ETF will always be buying when the market is high and selling when it's low (the debt will end up less than 50% of the value if the market goes up, requiring them to buy more to maintain 2x leverage, and the reverse when it's down). So if the market doesn't move in a straight line you make less than 2x the S&P 500 return over time, including losing extra money in neutral and bear markets.

smabie 7y ago
Sure, check out my post: ETFs, Volatility and Leverage: Towards a New Leveraged ETF Part 1 https://smabie.github.io/posts/2019/10/04/vol.html https://smabie.github.io/posts/2019/10/04/vol.html The word you’re looking for is volatility drag. Even so, levered ETFs are a good investment for most investors