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While the advice that you should pursue financial opportunities with higher yields (10% stock returns over 6% student debt interest rates), it is certainly not

While the advice that you should pursue financial opportunities with higher yields (10% stock returns over 6% student debt interest rates), it is certainly not that simple. 10% RoR is extremely optimistic, especially given that we are already in an optimistic, overpriced bull market that will not last (there are always corrections). In addition, this 10% is on the S&P, so you'd have to assume that you only put money into an S&P fund and not any individual stocks, bonds or secondary securities. Those funds have management fees, so that too eats away at your yield. But perhaps what is most important, is that plenty of people did quite poorly this year (the average return it appears was around 4.5% this year) so his assumptions are heavily weighted on speculation, volatility, and unproven performance.

sailfast 12y ago
I can't agree more with this comment. 10% return is insane to expect in the current market, especially since there is no actual safe haven that will get you any reliable return above inflation. The fact that the author was overpaying because "he didn't like debt" tells me a lot about his financial expertise to start. That aside, of course go with the higher return stuff, contribute to your 401K for your company at the max instead of pushing it toward student loans, but the rest of the logic is somewhat baffling given any sort of perspective on the market. I keep going back to the "Turkey that doesn't know tomorrow is Thanksgiving" analogy on this. Must be bliss to have such a short memory.
cpfohl 12y ago
If you're investing in an index fund against the S&P you're more or less going to track the stock market, which (historically) has been at or around 7-11%. This is not 'unproven' since the S&P 500 (in its current form) was created in 1957. That's a lot of years of data. An index fund (as a rule) has extremely low fees. See Vanguard.com for an example. If you have more than $10k in a Vanguard index fund your fees will be .05%. If you're thinking about how you did this year you're thinking wrong: stocks are a long term investment, not a get rich quick scheme.

sailfast 12y ago

I can't agree more with this comment. 10% return is insane to expect in the current market, especially since there is no actual safe haven that will get you any reliable return above inflation. The fact that the author was overpaying because "he didn't like debt" tells me a lot about his financial expertise to start. That aside, of course go with the higher return stuff, contribute to your 401K for your company at the max instead of pushing it toward student loans, but the rest of the logic is somewhat baffling given any sort of perspective on the market. I keep going back to the "Turkey that doesn't know tomorrow is Thanksgiving" analogy on this. Must be bliss to have such a short memory.

cpfohl 12y ago

If you're investing in an index fund against the S&P you're more or less going to track the stock market, which (historically) has been at or around 7-11%. This is not 'unproven' since the S&P 500 (in its current form) was created in 1957. That's a lot of years of data. An index fund (as a rule) has extremely low fees. See Vanguard.com for an example. If you have more than $10k in a Vanguard index fund your fees will be .05%. If you're thinking about how you did this year you're thinking wrong: stocks are a long term investment, not a get rich quick scheme.