Paid Off Homes (payment, convert, bonus, cheap)

[kyam11]

Originally Posted by twinkletwinkle22

mathkak said: paying off the expense of a loan has no risk to it

There could be a risk to paying off a mortgage loan if the money used to do that was needed in another area, medical emergency comes to mind. Prudent people always keep an emergency fund for this reason, to cover the unexpected. It is most peoples dream to own their home free and clear but this is also similar to putting all your eggs in one basket or only owning one stock.

Many financial gurus advocate having savings in a diversified portfolio. Your home should be a part of your savings but don't neglect investing in other areas like stocks.

No there cannot be a risk to a guaranteed rate of return. You could expose yourself to risk by paying off your mortgage, but the actual transaction of using money to get a guaranteed rate of return is by definition a risk free transaction.

It is painfully obvious almost no one here has taken a basic finance course.

These are not my opinions. These are definitions in the finance world.

[Thatsright19]

Originally Posted by kyam11

No there cannot be a risk to a guaranteed rate of return. You could expose yourself to risk by paying off your mortgage, but the actual transaction of using money to get a guaranteed rate of return is by definition a risk free transaction.

It is painfully obvious almost no one here has taken a basic finance course.

These are not my opinions. These are definitions in the finance world.

It’s obvious that you are buried in textbooks and not looking at the entire picture. No one cares to argue definitions with you. The rest of us are operating in reality.

But really, it’s great that you’re so impressed with your own finance education. Eventually you’ll understand that education is supposed to be used in realistic business scenarios. You seem to be focused on some idiotic definition of risk free.

[Mr. Zero]

Originally Posted by twinkletwinkle22

Many financial gurus advocate having savings in a diversified portfolio. Your home should be a part of your savings but don't neglect investing in other areas like stocks.

This is a good point, and if diversification is one of your goals, paying off a mortgage is a poor way to do it, even though I've seen it compared to buying bonds in this thread. With bonds, you can easily reallocate your assets when your allocation is off. It's a lot more difficult to reallocate when your money is tied up in a paid off house.

[CaptainNJ]

Originally Posted by kyam11

Then you have no understanding of risk. Risk is a measurable metric. Using money for a return of an interest rate with a measurable metric with a std deviation of 0 is 100% by definition a risk free return. Take a finance class. This is year 1 information.

avoiding paying additional interest expense isnt a return for you. this line of thinking is for children.

[selhars]

1) Once even the OP conceding that his/her own point and original premise didn't make much sense and that the initial statement was not exactly on point I didn't think there was much point in commenting on the contention.

2)

I’d be shocked if one person here even knew how to do the equation to compare different investments when adjusted for risk.

Now that's not smug, is it?
FYI, while there are some finance novices here. There are many, many others who are quite sophisticated when it comes to financial matters, particularly risk assessment and management, and investing.

Just a thought: when people disagree with you it may not be them who don't know what they're talking about.

[EDS_]

Originally Posted by UnfairPark

No, there is nothing wrong with lavish life if you don’t have money. No matter how you see it, heavy debt is not fiscal responsibility, it’s fake oppulence built without a foundation. That’s why we see so many foreclosures, bankruptcies and stress induced illnesses, people think it’s standard practice to play with fake money, even when they have little financial sense.

I didn't say anything remotely like that.

[fumbling]

Originally Posted by twinkletwinkle22

mathjak said: paying off the expense of a loan has no risk to it

There could be a risk to paying off a mortgage loan if the money used to do that was needed in another area, medical emergency comes to mind. Prudent people always keep an emergency fund for this reason, to cover the unexpected. It is most peoples dream to own their home free and clear but this is also similar to putting all your eggs in one basket or only owning one stock.

Many financial gurus advocate having savings in a diversified portfolio. Your home should be a part of your savings but don't neglect investing in other areas like stocks.

Agree with this, a paid off house by itself is not the ultimate goal, a paid off house and a diversified portfolio (which can be accomplished with just one stock index fund) is the ultimate goal.

[flyingsaucermom]

Originally Posted by fumbling

Agree with this, a paid off house by itself is not the ultimate goal, a paid off house and a diversified portfolio (which can be accomplished with just one stock index fund) is the ultimate goal.

Fully agree and you nearly stated my recipe towards retirement. You may share it with others.

You will need:

Maxed-out tax-sheltered accounts (IRA and 401k)
Contributions to a taxable brokerage account
Paid off mortgages on a couple rentals and primary residence

1) In a large portfolio mix together the above ingredients
2) Wait 15-20 years
3) Enjoy cold, hot or at room temperature with a sprig of mint.

[mathjak107]

Originally Posted by CaptainNJ

avoiding paying additional interest expense isnt a return for you. this line of thinking is for children.

we all should be very wealthy from all the return we are earning paying off expenses . Let’s not forget risk free too ha ha

[CaptainNJ]

Originally Posted by mathjak107

we all should be very wealthy from all the return we are earning paying off expenses . Let’s not forget risk free too ha ha

i paid for my lunch in cash. that is a 19.99% return considering the possibility that i would have used a credit card and carried the balance over.