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Old Yesterday, 01:44 PM
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it reaches a useless discussion at a point and this is that point .
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Old Yesterday, 01:45 PM
Location: Norfolk
1,668 posts, read 2,017,416 times
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Originally Posted by oceangaia View Post
NThe experts advised the small investors to stay the course even while they were having their big investors get out.

I noticed that.

As Joseph P. Kennedy said, "When the shoeshine boy gives stock tips, it's time to get out of the market."
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Old Yesterday, 01:47 PM
65,911 posts, read 67,194,540 times
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i wish i could have pennies on the dollar for all the money given up , when those who thought they were so smart exiting , blew it trying to get back in and got back in higher then they bailed out at . i think i would rival buffett in wealth
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Old Yesterday, 01:52 PM
7,730 posts, read 3,877,612 times
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Originally Posted by mathjak107 View Post
i wish i could have pennies on the dollar for all the money given up , when those who thought they were so smart exiting , blew it trying to get back in and got back in higher then they bailed out at . i think i would rival buffett in wealth

Go for it. It's called options trading.
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Old Yesterday, 01:55 PM
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that is incorrect .... my bet would be a sure thing . options have a good chance of being a loser
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Old Yesterday, 03:04 PM
1,046 posts, read 583,602 times
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Originally Posted by TXRunner View Post
I'm definitely going with putting it towards your mortgage. I'm not sure how many years you have left, but they probably gave you a sheet that told you how much of your monthly payments go towards interest and principle each year that you pay. Typically, some ridiculous amount such as 80% will be going to interest the first year. It tapers during the life of the mortgage, but the bank makes sure it gets a lot of it's money at the beginning.
What he said..

From the sound of things, a lot of people don't seem to understand that the more $ you put towards your mortgage, the less interest $ the bank gets. If you are able to cut just 5-10 years off of a 30 year mortgage then you are saving yourself an enormous amount of money.

Do the math... The bank literally makes no secret of how much you pay them over the life of the loan, so who wouldn't want to avoid that?
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Old Yesterday, 03:09 PM
2,240 posts, read 848,592 times
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Pay your house off as fast as you can. It is a good investment and you will save a ton on interest payments. Get out of debt. Once you have paid it off you can then invest a similar sum to stock market or less-risky investments.
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Old Yesterday, 03:18 PM
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Keep in mind when you do this you lose the factor of time . Time is what makes markets always turn out well . Waiting until after you are finished channeling extra money in a house to first start investing heavier puts extreme pressure on your time frame to be a good one needlessly .

Maybe it wiil maybe it won’t . But you really can hurt your asset growing base by delaying . Especially when a mortgage won’t change over time and the odds of beating any interest by markets over longer periods of time increases a lot.

It is a good way to end up house rich and cash shy in my opinion

Last edited by mathjak107; Yesterday at 04:12 PM..
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Old Yesterday, 04:27 PM
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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?
Depends on lots of factors - how well can you stomach losses in the market without selling, how stable is your job, how long do you plan on living there, and if your emergency and retirement savings are sufficient as things stand.

There are a number of ways to look at numbers, but for you, interest rates and liquidity needs are probably the most important to figure out. Generally, the lower your mortgage rate, the less likely it is to make sense to pay extra on it. Also, the more likely you are to have big expenses coming up, the more important it is to keep liquid savings of some sort. For example, if you are going to buy another house very soon and want the flexibility to buy it without having to first sell the current house, then prepaying your mortgage could tie up too much money.

Investing in the stock market can give you excellent long-term returns if you have the discipline not to sell when the market drops, and is also more liquid than home equity.
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Old Yesterday, 07:42 PM
Location: Silicon Valley
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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?
First off, congrats on being in position to have this question arise. The short answer is that either is a good move, but a lot depends on yourself.

Adding money to your mortgage won't increase the main benefit of buying a home, which is to lock in a lifetime rent cost and hedge it against inflation. If you're on a 30 year with 26 left, no doubt you're seeing a lot of your money go to interest. It's easy to look at that and say...that's a lot, and you are correct. By the time you're done paying your typical 30 year mortgage, you'll have likely paid for your home 3.3 times. 1 time for the home, the rest to the bank.

But before that figure sends your running for the hills, consider the typical equity investment. Investing in equities would have produced a still higher return. Consider in 1988 the S&P 500 was just 250.5...which was down from the year before at 264, but still. Fast forward 30 years and the S&P now stands at 2633 (on 12/7). Basically you've gone 10x on your money if in the S&P500.

Still, that is going to vary quite a bit. If we started in 1910, we were at 10, and 1940 had us at just 12.3

S&P 500 Historical Prices by Year

In the most recent instance, it's obvious that investing in equities was the better choice, but the 2nd instance showed a vastly superior preference for paying the debt sooner. So there's not an always right answer in terms of money.

The Argument for Liquidity

The answer is almost always based in liquidity. If you lose your job and can't make mortgage payments at all, much less more than the mortgage, you now risk losing all of your extra payments. While stocks are much more liquid, there's a different risk. You will most likely lose your job in a recession, and stocks tend to fall considerably in a recession. The place that I was at did a layoff in January, 2009 and another in February, 2009. If those workers didn't have any savings, they were going to be at risk to lose their homes. 401K participation was high, but you can't touch those funds until retirement without a hefty penalty and stock values were very low. Even if kept in a brokerage account, you still want enough savings so you can wait out a period of low prices. So before doing either, make sure you have savings.

The Argument for Mortgage Payments

Paying off loans early is often sneered at as silly, but there are some benefits to it. First, it's a nearly guaranteed rate of return....unfortunately locked in for 30 years. Assuming you don't default on your home loan, and few do, this will end your leverage sooner. You won't make a fortune doing this, but it does have two benefits:
1. You can get a new loan for a shorter duration. Once you've tried it and it's working out for you, you can get a 15 year loan. Often these cost less than a 30 year. Given the timeframe however, you're probably not going to get that savings.
2. If you forsee a time when you'll need to borrow again. Maybe you plan on having many children and will need a bigger home. Maybe you want to buy a rental property. Your credit opens up a bit when you get that big monthly payment gone....the caveat being that it gets zero help until it's actually gone.
3. There is peace of mind knowing that it's done.
Given our recent environment, you probably can't get a better loan (unless your credit has improved remarkably as well) and rising home prices make rental properties less likely. So you're basically getting a slightly inflation beating gain that you can't realize for awhile.

The Argument for Equities
As America vaulted into her Golden Age of the last Century, our stock market has whizzed up all the same. It's open to foreign money, it's housed the best opportunities and long term investors have been rewarded greatly. And for every milestone reached, there's been hand-wringing about the markets being too high and about to crash. The reality is the market will crash...someday. The choice of whether you sell for a ridiculously low price depends on your liquidity (do you have any other money) and your investing mindset.

Everyone should learn how to invest their money. It's important, and will replace your income once your labor years have passed if you do it correctly. Paying debt doesn't teach you how to do this. When you start, it's important to remember to only use money you don't need. You will make mistakes. At best, you'll lose a little money and learn from it. At worst, you'll get lucky and make a lot of money and think you're a genius....setting yourself up for an even bigger fall. Yes, investing is good and it should be thought of as something that needs to be done, just the same as paying a mortgage.

Also, if there's free money on the table like a 401K match. Grab that. That's a 100% gain that people sometimes miss.

Last Thoughts

I actually bought my first home late, but was in equities for a much longer time. So then, I was 100% equities. About 6-9 years ago I leveraged to the hilt to buy rental properties, so I've thought on this often. What I did was to let all the proceeds go to the loan itself, and created a larger liquidity cushion for myself from my labor proceeds. My labor contributes to equities. If equities get scary for me, I keep the investment there, but divert new money to pay down the loans. In a sense, this is my mix of bond/stock portfolio. It's not perfect, but it's worked. In it enough years now to realize what I've ironically done is moved more and more of my money to real estate and less and less to equities...which is basically what we're supposed to do as we get older.

At any rate, this spring, the first rental paid off. It felt great. I was letting it build liquidity. So then I really had to rethink the equation. Do I now send this on to my next highest rate, or put it in the stock market...same as you.

While I was thinking about it, my wife realized that loan was done, and being the only one that can actually speak to the tenants, convinced them to pay her at her store instead and she'd do the investing.

And we've invested quite a bit of it in Home Depot, Macys and Nordstroms...just not for their stock.
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