8 ms·

A lot of talk about mortgages here. I think as long as you do the math and let that guide your decisions, you'll come out ahead. Take this year, for example.

A lot of talk about mortgages here. I think as long as you do the math and let that guide your decisions, you'll come out ahead. Take this year, for example. I happen to have a mortgage that I could pay off completely later this year without penalties. I've been saving to do just that, and parking the balance in the market until the day comes to pull the trigger. But what's this? I'm up 11.6% on the year thus far. It's hard to come up with an argument for not letting it ride a few more months and watching to see what happens. Granted, there's always risk in the market, and using the fund today would net me a cool 4% risk free. But still...

ryandrake 12y ago
Paying down a mortgage is probably the safest, guaranteed bet. Not everyone can get lucky on stocks or bear the risk of being unlucky. If there was an available investment opportunity with a higher risk-adjusted rate of return than my mortgage interest rate, I wouldn't want to pay down my mortgage either. If I got all the money back I lost gambling on index funds and other "low risk" investments, I'd probably be able to pay mine off today. EDIT: guaranteed -> risk-adjusted
gtCameron 12y ago
Take a look at the historical returns of the stock market. Using the S&P 500 as an index, if you did the same in 2007 riding through 2008 you would have lost 37% of your money. You could very well continue to ride the wave up, but there is a non-zero risk that it all comes crashing back down again, and that needs to be considered in your equation.
BadCookie 12y ago
It's my understanding that institutional money has been leaving the stock market while less sophisticated investors have been moving their money into the market (on average). If I were you, I'd be afraid of being the last one standing when the music stops, but then again, I have a history of being overly conservative (to my detriment). Edited to add: If you aren't aware of what's happening with quantitative easing winding down, then do yourself a favor and read up on it.

ryandrake 12y ago

Paying down a mortgage is probably the safest, guaranteed bet. Not everyone can get lucky on stocks or bear the risk of being unlucky. If there was an available investment opportunity with a higher risk-adjusted rate of return than my mortgage interest rate, I wouldn't want to pay down my mortgage either. If I got all the money back I lost gambling on index funds and other "low risk" investments, I'd probably be able to pay mine off today. EDIT: guaranteed -> risk-adjusted

gtCameron 12y ago

Take a look at the historical returns of the stock market. Using the S&P 500 as an index, if you did the same in 2007 riding through 2008 you would have lost 37% of your money. You could very well continue to ride the wave up, but there is a non-zero risk that it all comes crashing back down again, and that needs to be considered in your equation.

BadCookie 12y ago

It's my understanding that institutional money has been leaving the stock market while less sophisticated investors have been moving their money into the market (on average). If I were you, I'd be afraid of being the last one standing when the music stops, but then again, I have a history of being overly conservative (to my detriment). Edited to add: If you aren't aware of what's happening with quantitative easing winding down, then do yourself a favor and read up on it.