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I wonder to what extent the distribution is influenced by the significant number of people that plow their savings into paying down their mortgage even when it
by jandrewrogers 3y ago
I wonder to what extent the distribution is influenced by the significant number of people that plow their savings into paying down their mortgage even when it makes no financial sense (e.g. their mortgage interest rate is 3%). I know many people that do this and don't have any stock market investments beyond their retirement account.
People at different percentiles of net worth do not have the same asset distribution.
- claudiulodro 3y agoIt does make financial sense for many though, because risk exists. In a big downturn would you rather be laid off with a paid-for house or laid off with a mortgage and a bunch of stocks that just plummeted in value?
- deleted 3y ago[deleted]
- jandrewrogers 3y agoI would much rather prefer the latter actually because the risk is lower. People tend to seriously discount the risk of non-liquidity in these situations, which is the scenario the former sets up. I know multiple people that discovered this the hard way. Houses without mortgages aren't anywhere close to free to live in and they can have very little liquidity in a big downturn.
- RhysU 3y agoAlso, it's easy to sell X% of a stock portfolio for 0 <= X =< 100 but difficult to do the same for a house. (This is possible with stocks for some X outside those bounds too!)