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When you simultaneously have (A) a mortgage, and (B) liquid investments (stock, bonds)
you are employing leverage.
I like leverage - in moderation, of course.
Using borrowed money to invest is a whole other discussion since a lot depends on just what part of your life cycle you are in , rates and whether the market is valued low or high .
The reason is as Michael kitces explained as we age the risk premium over risk free assets have to be worth doing it while spending down and increasing sequence risk .
It may no longer be worth it. For many to borrow, and put the money in a 60/40 …with rates near zero and stocks highly valued , to pay 3-4% in interest to maybe get 6% or even 8% may not be worth the risk to borrow money for via a mortgage…so unless 100% equities you may be taking on more risk by having thousands a month to pay in interest at the same time you are in a down market and spending down as well to live …
That Is a very different combo then while not spending down with borrowed money and that creates very different risks
As I said in my post, you and I understand one another, and disagree: you don't find my view any more compelling than I find yours. That's OK; reasonable people can and do disagree on things.
One question: above you say "a total market fund or s&p fund over decades is not risky , it is volatile".
Can you explain your view a bit more? I ask because in my mind volatility ≡ risk and risk ≡ volatility.
Risk is when you try to outsmart the markets at their own game so you time , bet on sectors , bet on individual stocks . You may never get back what you are down even if markets are up .
Volatility is the natural ups and down of the market …over many years it has always panned out well , some years just better than others ..it is only the daily volatility you need to worry about .
However volatility becomes risk when you have a finite time frame
Risk is when you try to outsmart the markets at their own game so you time , bet on sectors , bet on individual stocks . You may never get back what you are down even if markets are up .
Volatility is the natural ups and down of the market …over many years it has always panned out well , some years just better than others ..it is only the daily volatility you need to worry about .
However volatility becomes risk when you have a finite time frame
Risk and volatility is a set of terms that people use interchangeably when they have very clear differences. Common ones here are chance and probability. Gambling and investing. And Ponzi scheme and any system they don’t like.
Risk and volatility is a set of terms that people use interchangeably when they have very clear differences. Common ones are here are chance and probability. Gambling and investing. And Ponzi scheme and any system they don’t like.
For sure ……they all have very different meanings , just like investing vs speculating
When I hear all this talk about 6 figure incomes - not only here in California but across the country - I am boggled.
I worked in government for the last 30 years of my career. My end salary was $60K. I worked up from the high $20’s at my last employer - yes, with promotions along the way.
I DID save almost a million dollars - in our portfolio- because I knew I was going to need it in retirement. It’s a lot of money to me. Lucky for us - we also inherited money - but lived our lives as if we weren’t going to. We’ve been able to live on the pension and social security alone not touching savings nor the portfolio. Everything else is a buffer against what life will present to us as we age.
I wonder what all those folks with 6 figure incomes will think is “not enough”. If they are spending all of their 6 figure income - are they saving for the future? Time will tell.
The amount is truly relative, but the principles work the same. Here in San Jose, the average rent is $2700 a month. So for your 21 year old setting off into the world, if they experience 3% rent increases each year, if they die at 85, that last year their rent will be $17,904.
Don't like that number? Ok, starting rent is $1000. Ending rent is $6,631. Rent at age 65 is $3,671. So between 65 and 85, prices will come close to doubling. More accurately, the average home sale price in January 2001 was $139,642. In December 2020 it was 300,986. Yet supposedly we've had record low inflation during that period.
My grandmother lived to be 99.5. When she first started teaching, she made $25/month. Income taxes in those days were reserved for those people who were quite wealthy and making more than $2K a year. Granted, it can be argued somewhat that she started in an era of standard dollars, but even then things moved.
The reality is that this country has had much higher degrees of inflation than reported for things made in the USA, but the full number has been brought down by greater utility in function for comparable and import substitution. Compound interest does not come naturally to people. Most think in coefficients as opposed to exponentials. Exponentials are already in play, but at a low rate.
Whether one can retire. To walk away from a productive pursuit that provides a means of a living is a matter of how well one has prepared for those exponentials....because once off the treadmill, there's no going back, and people want to have choices in retirement. People want to rest assured of comforts in retirement. Nobody wants to come to a realization that 10 years before they'd miscalculated, and there's nothing they can now do about it.
Luckily, there's a great deal we can do about it even in retirement....which many people see and retire on less....but it's all a factor in how people want to handle risk.
It is still kind of sad when you even equate property tax with mortgage in the same sentence. Property tax should't be close to mortgage.
Now, I realize there are many factors. Your mortgage could be year 29 on a 30 year loan, so the mortgage seems tiny today vs. closing 29 years ago. You could also upgrade to a far pricier property.
Still, when I read your property tax is not more than your former mortgage, I still cringed. It just sounds so wrong.
It’s a choice to live here. No one is forcing us. We knew what it would cost going forward.
Risk and volatility is a set of terms that people use interchangeably when they have very clear differences. Common ones here are chance and probability. Gambling and investing. And Ponzi scheme and any system they don’t like.
Can you expand on your view of the differences between risk and volatility?
I often leave HGTV on in the background because it’s pleasant white noise and have consequently seen many chunks of ‘My Lottery Dream Home’. Granted the participants may have had to go through some financial counseling before going on the show but in contrast to House Hunters (‘he works in a skateboard shop and she teaches goat yoga; their budget is $1.2 million’) they typically come across as pretty grounded people of modest means who know this is their one big windfall in life and they don’t want to screw it up. So they’re often now buying a $250k or less home in a middle America suburb and all excited to be living in a house with its own dishwasher for the first time in their lives.
It’s an interesting take on how not everyone who gets a sudden windfall will just blow it frivolously.
Risk is when you try to outsmart the markets at their own game so you time , bet on sectors , bet on individual stocks . You may never get back what you are down even if markets are up
You are clueless. Timing is Everything. BUY LOW; SELL HIGH.
Like every stock, what matters is when you BUY IT and WHEN you SELL IT. Nothing else matters.
You are clueless. Timing is Everything. BUY LOW; SELL HIGH.
Like every stock, what matters is when you BUY IT and WHEN you SELL IT. Nothing else matters.
TIMING is the key to investment!
Yeah I am clueless
So keep timing ..like everything you spew , just keep believing your own bull .
Not only do you believe you have the predicting power of guessing what’s next in the economy but now you have the mystical gift of timing stocks too ….in the mean time you only posted one transaction , that was bought the day I called you out as not even being an investor of any meaningful proportion and posted nothing else to prove you put your money where your mouth is
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