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>keep the cash in an investment account making > 5% APR vs. the house loan which presumably is in the low 3s. One is guaranteed, one is not. Markets are volati
by Clubber 5y ago
>keep the cash in an investment account making > 5% APR vs. the house loan which presumably is in the low 3s.
One is guaranteed, one is not. Markets are volatile. I lived through 2001 and 2008 as a working stiff, that shit can drop on a dime.
Right now, I have no debts. House and vehicle are paid off and I have an "oh shit" account that's pretty good. I can sit here as a hermit for at least a year or two, three if I really hunkered down and pinched pennies. It's a good feeling; one less thing to worry about.
Now if I put all that money into the market and shit hit the fan, not only would I not be willing to sell stocks due to their price plummeting, I would still have a mortgage and car payment. I'd be in this situation for 6 months to a year. Not a great situation.
Ensure your freedom / ability to live first, then invest heavily, IMO.
- knappe 5y agoThis is something you can hedge against, which is known as a sequence risk [0]. There are investment vehicles with built in volatility buffers designed to avoid this https://paradigmlife.net/blog/episode/the-volatility-buffer-how-to-reduce-the-risk-in-investing/ https://paradigmlife.net/blog/episode/the-volatility-buffer-.... That 3 years of cash on hand would be better off in some kind of investment and if you're worried, supported by a volatility buffer. [0] https://www.investopedia.com/terms/s/sequence-risk.asp https://www.investopedia.com/terms/s/sequence-risk.asp
- foobarian 5y agoThis illustrates why rich people are rich, and have an easier time getting richer. Even if they don't have time or aptitude to learn about this kind of thing, they have family or paid professionals to guide them.