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Old 12-07-2018, 04:41 PM
 
2,451 posts, read 2,162,802 times
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Quote:
Originally Posted by homelessinseattle View Post
It's always good to pay down debt. Can you do both?
No it isn't.

I had the cash to pay for a new car earlier this year. I financed every penny of it for the longest term I could while still getting a 1.79% interest rate.
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Old 12-07-2018, 05:32 PM
 
207 posts, read 97,644 times
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Please tell us how buying a new car on credit is a good investment.
Can you tell us what you did with the cash? Invest it in the market? Rentals?
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Old 12-07-2018, 05:41 PM
 
17,783 posts, read 12,468,525 times
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Quote:
Originally Posted by homelessinseattle View Post
Please tell us how buying a new car on credit is a good investment.
Can you tell us what you did with the cash? Invest it in the market? Rentals?
Online fdic insured savings are paying more than 1.79%
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Old 12-07-2018, 06:23 PM
 
Location: USA
16,898 posts, read 16,527,069 times
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Quote:
Originally Posted by homelessinseattle View Post
Please tell us how buying a new car on credit is a good investment.
Can you tell us what you did with the cash? Invest it in the market? Rentals?

There are 12 month CDs that pay 2.65%
There are FDIC online savings accounts that pay 2% compounded daily
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Old 12-07-2018, 06:25 PM
 
2,256 posts, read 1,211,267 times
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So long as there wasn't a rebate ILO special financing, then it was a good deal and solid strategy.
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Old Yesterday, 07:08 AM
 
9,503 posts, read 11,347,084 times
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Quote:
Originally Posted by homelessinseattle View Post
Please tell us how buying a new car on credit is a good investment.
Can you tell us what you did with the cash? Invest it in the market? Rentals?
This is the "glitch" for most people. Sure finance the debt at a fixed rate for as long as possible but the harder part is to find the appropriate investment that outpaces the cost of the debt.

The life insurance guys love to say, buy term and invest the rest. Fact is, people rarely "invest the rest!"
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Old Yesterday, 08:04 AM
 
65,848 posts, read 67,167,185 times
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investor behavior is always the wild card . markets will almost always do better over time . because of poor investor behavior most small investors will not .

but that does not change the facts being what they are , the opportunity is there . .
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Old Yesterday, 09:02 AM
 
Location: Paranoid State
12,945 posts, read 9,669,602 times
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Quote:
Originally Posted by inquisitive2 View Post
I'm about 4 years into my mortgage. Am I better off to make some extra payments on my mortgage or invest in some stock?
The answer isn't arithmetic. The answer is embedded in your risk tolerance and in the construction of your portfolio (which specific asset classes).

The reason risk tolerance plays in major role is that you are in effect borrowing money against your house to invest in other asset classes. That is, you are leveraged. How does that make you feel? Different people have different risk tolerance levels.

The reason the rest of your portfolio plays a role on answering the question is real estate is one asset class to own. What does your "pie chart" of assets look like? Other typical asset classes beyond residential real estate include commercial real estate (perhaps divided between office space, retail space, multi-tenant apartments, etc), large capitalization equities, mid cap, small cap, emerging market, EMEA, short term tax-free muni bonds, long term government bonds, corporate bonds, etc. etc. etc.

Sooo... by making an extra mortgage payment, you reduce leverage but you do not alter the slices of your portfolio pie chart. The alternative is investing that mortgage payment into other asset classes so you alter the shape of each slice of your portfolio pie chart. Some of your pie chart slices may well be 0 right now in which case investing in them increases their slice to be visible on your pie chart.

Academic research shows the bulk of investment returns to an overall portfolio depends much more on the construction of that portfolio - the specific pie slices and their relative sizes - than it does on which stocks you own.

For many people earlier in their careers, their personal home represents too large a slice of their personal portfolio and hence investing a marginal dollar in the stock market or debt market is a good thing to do.

For others who have little tolerance for risk, de-leveraging and hence owning a paid-off home sooner trumps any potential benefit from a more well diversified portfolio of investment assets and hence investing a marginal dollar in paying down the mortgage is a good thing to do. For example, members of the "greatest generation" who grew up during the Great Depression frequently exhibit nearly extreme risk-avoidance and would sacrifice much to be debt free. Why? They remember soup lines. They remember "city folk" walking 20 miles to work on farms for free so long as they were fed.

There is no right answer. There is no wrong answer.
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Old Yesterday, 09:27 AM
 
9,990 posts, read 14,208,127 times
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OP, you live in a country that is run by keeping people in debt. They so much became used to it, by everpresent "it is better to be in debt" tune that they can't think outside that box. Add to this, that they can easily circle back to the same source, that put that idea into their minds, and sources will easily provide them with gymnastics and equlibristics of math and "examples" "proving" that it is good to be in debt. Also, literally all of "advisors" here ARE in debt and think accordingly. None of them became Mr Buffet or, they simply wouldn't bother with spending time on CD. So you get according advice.
Ocenagaia, thank you, has the best sober opinion. Are you investing genius? Do you KNOW how to invest, do you have any insider information that will GUARANTEE you not losing money? Do you feel lucky, or do you? I have been through enough financial crashes and money reforms to know better. In matter of one TV announcement all savings or investments may be gone in puff. And the word out there is - you are looking at just that.
So here's my very simple, non Buffet philosophy. Real estate is real estate. It historically grows in value 7% a year. Add to this that every penny, you put into principal, saves your interest rate amount. Say, it 4 - 5%. That adds up to 12% literally risk free money placement. Oh, and I KNOW what it feels like be debt free and own the property straight. Very fulfilling.

So sure, you may want to have debt to "free money" to buy a new toy. Basically, add debt to debt. But, should you be a frugal person that knows how to save and can tame buying cravings and has secure stable income - PAY OFF THE DARN MORTGAGE. Listen to no one, as they don't care about you and spend not your money. You want your money SAFELY invested, real estate it is. As a side dish, my "investments", what's left of them, as I sold basically all and keep cash in money market, keeping 2 stocks as gauge - lost 21% in the last 2 months and going down.

Remember one thing - NO ONE knows what will happen next. Not a single investment or a country is protected from disappearing. Out of such gloomy thoughts, as Mr Rogers said - put your money into dirt, they don't make it anymore.
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Old Yesterday, 09:29 AM
 
65,848 posts, read 67,167,185 times
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there is good debt and there is bad debt . i suggest everyone who is fuzzy on this , learn the difference
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