3 ms·
I've toyed with this kind of thing before and things can look good in simulation, until I incorporated realistic effects of: - trading commissions & fees - cap
by plg 14y ago
I've toyed with this kind of thing before and things can look good in simulation, until I incorporated realistic effects of:
- trading commissions & fees
- capital gains taxes
- currency exchange (for those of us "unamericans")
then all of a sudden blammo, I decided I'm better off putting "investment" cash into my mortgage
- jrockway 14y agoMight be a good idea if you are paying 12% interest on your mortgage, but not such a good idea if you're paying 3%. I don't know what country you're in, but if you want to invest in the US stock market, I'm sure your broker sells an index fund with very low management fees. That may be a better investment than putting everything into a single home in the current market. (In the US, mortgage interest is tax-deductible, making this strategy even less of a good idea.)
- plg 14y agoMortgage interest not deductible here (Canada). Our current mortgage rate is 3.8% so given marginal taxe rate of 46% I would need to have a guaranteed return of at least 8.3% just to match wha I would save by "investing" in my mortgage. You tell me where I can get a 8.3% return over the next 5 yrs, guaranteed. PS here in Canada (maybe exception is Vancouver) our housing market is v stable, in my City house prices did not even dip during 2008 crisis. Yay Canada!
- nandemo 14y agoYou're quite right about trading fees and taxes, but what's that about being non-American? Practically all developed countries have a functioning stock exchange.