Pay off mortage or buy Lexus?

[jerebear21]

You are placing way too much faith on a bull market. Like I said it has been historically good but this wasn’t predicted 8-9 years ago. I would be retired now if I dumped more money in my portfolio 10 years ago. I am all about leveraging but if a person only owes 65k left on a mortgage it’s best to pay it off. He’s 55 years old. Predicting a 10-12% growth is not sustainable. Last year my portfolio was up 30% but I don’t depend on that. Like Golf it will even out so it’s best to underestimate.

 

A portfolio should contain property. It may not look too good now but OP is in a good spot(65k debt on a 400k home pending a bubble). It's irresponsible to put all your eggs in one basket.

 

I have a buddy who's all about automatic. He dumped everything into the most conservative vanguard account. Essentially guaranteeing him 4% growth. And sitting on 600k in retirement fund at your age doesn't mean you have 600k at your disposal. You essentially blocked yourself from withdrawing anything due to the steep tax hit you will likely take. At what point is too much money in one portfolio becomes harmful? OP is most likely limited to a handful of tax deferred accounts. Anything more may not be worth it at this point.

 

FYI I'm not a financial adviser but anyone promising 10-12% growth is someone I would run away from ASAP. I play golf with a couple managing directors and they've given me the same advice throughout the year.

[GolfNuts4]

OP, your optimal solution would be to put very, very minimal down on the Lexus. Just enough to drive it off the lot. With the remainder of all that cash you have, you should drive that Lexus to the nearest casino, let it roll on red 27 on the roulette wheel. You can thank me later.

 

This is a no brainer...pay off that mortgage!!

[spazo]

You are placing way too much faith on a bull market. Like I said it has been historically good but this wasn’t predicted 8-9 years ago. I would be retired now if I dumped more money in my portfolio 10 years ago. I am all about leveraging but if a person only owes 65k left on a mortgage it’s best to pay it off. He’s 55 years old. Predicting a 10-12% growth is not sustainable. Last year my portfolio was up 30% but I don’t depend on that. Like Golf it will even out so it’s best to underestimate.

 

A portfolio should contain property. It may not look too good now but OP is in a good spot(65k debt on a 400k home pending a bubble). It's irresponsible to put all your eggs in one basket.

 

I have a buddy who's all about automatic. He dumped everything into the most conservative vanguard account. Essentially guaranteeing him 4% growth. And sitting on 600k in retirement fund at your age doesn't mean you have 600k at your disposal. You essentially blocked yourself from withdrawing anything due to the steep tax hit you will likely take. At what point is too much money in one portfolio becomes harmful? OP is most likely limited to a handful of tax deferred accounts. Anything more may not be worth it at this point.

 

FYI I'm not a financial adviser but anyone promising 10-12% growth is someone I would run away from ASAP. I play golf with a couple managing directors and they've given me the same advice throughout the year.

 

It's not "placing a lot of faith in the market." If you believe in math in any way you know the market will go up. If the market doesn't go up over a 15 year time horizon, this country has way bigger problems than your portfolio value, and you're going to be in bad shape regardless.

 

Here... https://www.marketwatch.com/investing/index/djia/charts

 

Look at the entire history. Over a short time, the market is very volatile. Over a long time, it can only go up, and,.like I said, if it doesn't, everything is going to lose value.

 

Spend some time on bogleheads.org. Low cost index funds offer reduced risk through diversification. No, don't cash out your equity and buy one stock, but investing is not speculating, and you're treating the two things the same.

 

There is absolutely no point at which you have "too much money" in a well diversified fund. That statement doesn't make sense. It's like saying you have too much money or too much health.

 

You definitely should have an asset allocation between bonds, foreign, and us domestic imho, but that's a personal choice. And you can easily get that with a few ETFs. Look up the bogleheads Lazy portfolios. I like the Lazy 4.

 

As far as not having access to retirement funds..that's the point. I'm delaying gratification on the use of funds until later. But there are plenty of ways to get access to the value in a retirement account without paying a penalty. For instance, if you really really really wanted, you could take a secured loan against the balance in the account as collateral. But there's are semantics. The point is the same...having money in retirement accounts is something everyone needs to do

[jerebear21]

OF course it goes up. The rate is 7% over the lifetime of the s&p

 

But that doesn’t mean you should be expecting 10-12% sustainability. Majority of the folks on this forum have been there. Done that. You are not preaching to a noob. You never ever put all eggs in one basket.

 

And of course there is a cap on how much you can put in your portfolio without getting punished by tax. It’s not free money like you suggest.

[spazo]

I never said 10-12% sustainably. But if one year or two years are up 30%, that makes up for a lot of less-than-10% years in the average.

 

Eta: your 7% number isn't really accurate either. It's 7% inflation-adjusted and ignoring dividend reinvestment. https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

[jerebear21]

Inflation is always considered....

[spazo]

Inflation is always considered....

look I don't care whether you want to consider inflation or not, but compare apples to apples and consider inflation on all things. When home values rise, they typically do so at the rate of inflation, so effectively you're getting 0% growth on home equity. So whether you're saying it's 4% and 11% or 0% and 7% you still end up way ahead with equities

[jerebear21]

You’re young and aggressive. We get it.

 

I know people personally who lost millions in 08/09 while you were still in school. Op is in a good situation. He doesn’t need to leverage himself to that extent.

[Hit em good]

You are placing way too much faith on a bull market. Like I said it has been historically good but this wasn't predicted 8-9 years ago. I would be retired now if I dumped more money in my portfolio 10 years ago. I am all about leveraging but if a person only owes 65k left on a mortgage it's best to pay it off. He's 55 years old. Predicting a 10-12% growth is not sustainable. Last year my portfolio was up 30% but I don't depend on that. Like Golf it will even out so it's best to underestimate.

 

A portfolio should contain property. It may not look too good now but OP is in a good spot(65k debt on a 400k home pending a bubble). It's irresponsible to put all your eggs in one basket.

 

I have a buddy who's all about automatic. He dumped everything into the most conservative vanguard account. Essentially guaranteeing him 4% growth. And sitting on 600k in retirement fund at your age doesn't mean you have 600k at your disposal. You essentially blocked yourself from withdrawing anything due to the steep tax hit you will likely take. At what point is too much money in one portfolio becomes harmful? OP is most likely limited to a handful of tax deferred accounts. Anything more may not be worth it at this point.

 

FYI I'm not a financial adviser but anyone promising 10-12% growth is someone I would run away from ASAP. I play golf with a couple managing directors and they've given me the same advice throughout the year.

 

It's not "placing a lot of faith in the market." If you believe in math in any way you know the market will go up. If the market doesn't go up over a 15 year time horizon, this country has way bigger problems than your portfolio value, and you're going to be in bad shape regardless.

 

Here... https://www.marketwa...dex/djia/charts

 

Look at the entire history. Over a short time, the market is very volatile. Over a long time, it can only go up, and,.like I said, if it doesn't, everything is going to lose value.

 

Spend some time on bogleheads.org. Low cost index funds offer reduced risk through diversification. No, don't cash out your equity and buy one stock, but investing is not speculating, and you're treating the two things the same.

 

There is absolutely no point at which you have "too much money" in a well diversified fund. That statement doesn't make sense. It's like saying you have too much money or too much health.

 

You definitely should have an asset allocation between bonds, foreign, and us domestic imho, but that's a personal choice. And you can easily get that with a few ETFs. Look up the bogleheads Lazy portfolios. I like the Lazy 4.

 

As far as not having access to retirement funds..that's the point. I'm delaying gratification on the use of funds until later. But there are plenty of ways to get access to the value in a retirement account without paying a penalty. For instance, if you really really really wanted, you could take a secured loan against the balance in the account as collateral. But there's are semantics. The point is the same...having money in retirement accounts is something everyone needs to do

 

Spazo,

 

You sure talk like you're a certified professional financial planner who is absolutely convinced in your own advice, is only 33 years old, and was only 24 when the current bull market took off. I've worked with some well respected financial professionals, and they weren't nearly as confident and definitive.

 

When you're 53, and giving financial advice, I'm convinced you will speak with a little more modesty on this topic.

 

Hit em good

[jerebear21]

I was thinking the same thing. I golf with managing directors with net worth north of 8 figures. Not your average analyst. And they have never came off with such an aggressive tone.

 

Unless someone is selling a Ponzi scheme they are always preaching the opposite.

[spazo]

LoL I'm not an investment professional. I'm a guy who's spent a lot of effort on research and done quite well as a result.

 

Math is math, guys. It doesn't change just because you're older. When you find me a mathematical reason why I'm wrong I'll be happy to reconsider. Availability heuristics are great but I don't have any idea what your friends were doing to lose millions, so it's really hard to argue whether I would be supporting what they were doing or not. I know people who made millions as a result of the financial crisis because they had cash and it was a great time to buy in to value.

 

Btw, I got out of school in 2006, so not exactly the right time frame.

[FairwaysToHeaven]

Inflation is always considered....

look I don't care whether you want to consider inflation or not, but compare apples to apples and consider inflation on all things. When home values rise, they typically do so at the rate of inflation, so effectively you're getting 0% growth on home equity. So whether you're saying it's 4% and 11% or 0% and 7% you still end up way ahead with equities

 

anyone can make money in a bull market. just like the guys who thought they were brilliant day traders when the market was continually going up. the real test will be when there is a downturn.

 

i'm guessing you're not married and no kids? choosing to own vs rent a home is hardly a simple choice of financial return. its a choice of neighborhood, privacy, land, school district, ability to alter property or add on to property, etc.

[spazo]

Inflation is always considered....

look I don't care whether you want to consider inflation or not, but compare apples to apples and consider inflation on all things. When home values rise, they typically do so at the rate of inflation, so effectively you're getting 0% growth on home equity. So whether you're saying it's 4% and 11% or 0% and 7% you still end up way ahead with equities

 

anyone can make money in a bull market. just like the guys who thought they were brilliant day traders when the market was continually going up. the real test will be when there is a downturn.

 

i'm guessing you're not married and no kids? choosing to own vs rent a home is hardly a simple choice of financial return. its a choice of neighborhood, privacy, land, school district, ability to alter property or add on to property, etc.

married with 3 kids.

 

You guys want to try to guess anything else about me? Height? Weight? Shoe size? Handicap?

 

On your other point, yeah everyone can make money in a bull market. But the 40-year history of the s&p is not one big bull market...It's economic growth of our nation. If you don't think that's going to happen then you shouldn't buy anything

[jerebear21]

Then your student loans should have been paid off. 12 years with that albatross over your head is a no no.

 

Math is math and risk is still risk.

[spazo]

Then your student loans should have been paid off. 12 years with that albatross over your head is a no no.

 

Math is math and risk is still risk.

0.25%? Lol...that's definitely not an albatross

[jerebear21]

Unless I see it I will doubt it. I know a lot of folks who graduated during that time and the lowest it’s been was 3/4% and only reduced to half after a certain amount of payments. You are talking to a guy who paid off 200k in 7 years.

[spazo]

Whatever man. That's kind of a dick move to say I'm lying about my own finances.

 

But whatever, even at 0.75%, it's not an albatross by any stretch.

[jerebear21]

Not a d8ck move. You fall into the category of if you can over leverage you would. That’s not the responsible thing to do. What’s better? A paid off home and 4-5% return on 1 million or go for broke mentality ? Millions were lost before the turn of the decade. OP is in a good spot. There’s no need to take on more risk.

[Hit em good]

Inflation is always considered....

look I don't care whether you want to consider inflation or not, but compare apples to apples and consider inflation on all things. When home values rise, they typically do so at the rate of inflation, so effectively you're getting 0% growth on home equity. So whether you're saying it's 4% and 11% or 0% and 7% you still end up way ahead with equities

 

anyone can make money in a bull market. just like the guys who thought they were brilliant day traders when the market was continually going up. the real test will be when there is a downturn.

 

i'm guessing you're not married and no kids? choosing to own vs rent a home is hardly a simple choice of financial return. its a choice of neighborhood, privacy, land, school district, ability to alter property or add on to property, etc.

married with 3 kids.

 

You guys want to try to guess anything else about me? Height? Weight? Shoe size? Handicap?

 

On your other point, yeah everyone can make money in a bull market. But the 40-year history of the s&p is not one big bull market...It's economic growth of our nation. If you don't think that's going to happen then you shouldn't buy anything

 

Must be nice to have learned it all, and at 33 no doubt.

 

(Don't forget to send in your payment on that $1500 school loan. Don't want your credit to take a hit :taunt: )

[spazo]

Must be nice to have learned it all, and at 33 no doubt.

 

(Don't forget to send in your payment on that $1500 school loan. Don't want your credit to take a hit :taunt: )

 

bring out some math, or data, and prove to me that i'm wrong. i'll wait.

 

"you're 33" is not proof that i'm wrong. it's just proof that you have no other thing to say.

[Hit em good]

Must be nice to have learned it all, and at 33 no doubt.

 

(Don't forget to send in your payment on that $1500 school loan. Don't want your credit to take a hit :taunt: )

 

bring out some math, or data, and prove to me that i'm wrong. i'll wait.

 

"you're 33" is not proof that i'm wrong. it's just proof that you have no other thing to say.

 

No way to prove you wrong. You know it all already.

 

Funny though, none of the financial pros I know are making monthly payments on a $1,500 loan. They must not know what you know.

[spazo]

Must be nice to have learned it all, and at 33 no doubt.

 

(Don't forget to send in your payment on that $1500 school loan. Don't want your credit to take a hit :taunt: )

 

bring out some math, or data, and prove to me that i'm wrong. i'll wait.

 

"you're 33" is not proof that i'm wrong. it's just proof that you have no other thing to say.

 

No way to prove you wrong. You know it all already.

 

Funny though, none of the financial pros I know are making monthly payments on a $1,500 loan. They must not know what you know.

 

i don't know what financial professionals you're talking to, but go ahead and ask them if they would pay more than the minimum on a 0.25% loan. if any of them tell you they would, fire them immediately.

[Hit em good]

Must be nice to have learned it all, and at 33 no doubt.

 

(Don't forget to send in your payment on that $1500 school loan. Don't want your credit to take a hit :taunt: )

 

bring out some math, or data, and prove to me that i'm wrong. i'll wait.

 

"you're 33" is not proof that i'm wrong. it's just proof that you have no other thing to say.

 

No way to prove you wrong. You know it all already.

 

Funny though, none of the financial pros I know are making monthly payments on a $1,500 loan. They must not know what you know.

 

i don't know what financial professionals you're talking to, but go ahead and ask them if they would pay more than the minimum on a 0.25% loan. if any of them tell you they would, fire them immediately.

 

Of course, because you know more than them.

[cdnglf]

Must be nice to have learned it all, and at 33 no doubt.

 

(Don't forget to send in your payment on that $1500 school loan. Don't want your credit to take a hit :taunt: )

 

bring out some math, or data, and prove to me that i'm wrong. i'll wait.

 

"you're 33" is not proof that i'm wrong. it's just proof that you have no other thing to say.

 

No way to prove you wrong. You know it all already.

 

Funny though, none of the financial pros I know are making monthly payments on a $1,500 loan. They must not know what you know.

 

i don't know what financial professionals you're talking to, but go ahead and ask them if they would pay more than the minimum on a 0.25% loan. if any of them tell you they would, fire them immediately.

 

Of course, because you know more than them.

 

This is common sense; no financial "professionals" required.

If you can make more than 0.25% return by investing money you'd otherwise use to repay the loan, why would you rush to repay?

 

I don't know how spazo got a 0.25% student loan... presumably he's being subsidized somehow?

[spazo]

Must be nice to have learned it all, and at 33 no doubt.

 

(Don't forget to send in your payment on that $1500 school loan. Don't want your credit to take a hit :taunt: )

 

bring out some math, or data, and prove to me that i'm wrong. i'll wait.

 

"you're 33" is not proof that i'm wrong. it's just proof that you have no other thing to say.

 

No way to prove you wrong. You know it all already.

 

Funny though, none of the financial pros I know are making monthly payments on a $1,500 loan. They must not know what you know.

 

i don't know what financial professionals you're talking to, but go ahead and ask them if they would pay more than the minimum on a 0.25% loan. if any of them tell you they would, fire them immediately.

 

Of course, because you know more than them.

if you asked a doctor whether you should eat more cheeseburgers and he said "yes," you should fire him too. sometimes the answer is obvious.

[jerebear21]

cheeseburgers is the best post workout meal there is.

[spazo]

This is common sense; no financial "professionals" required.

If you can make more than 0.25% return by investing money you'd otherwise use to repay the loan, why would you rush to repay?

 

I don't know how spazo got a 0.25% student loan... presumably he's being subsidized somehow?

everything i've posted is common sense. and verifiable. i gave you the source--go to the website run by john bogle's (the founder of vanguard) followers and tell me if anything i've posted is wrong. go watch videos of john bogle talk about it. you don't want to believe a 33-year old, go listen to a 80-something year old. bogleheads.org. it's frankly basic math. unfortunately, people are motivated more by fear of loss than by potential to gain. in the face of math, they turn to fear as their only justification for making poor decisions.

 

math has no such sense of fear, so choosing your investments based on fear is like choosing your food based on what letter its name starts with.

[cdnglf]

This is common sense; no financial "professionals" required.

If you can make more than 0.25% return by investing money you'd otherwise use to repay the loan, why would you rush to repay?

 

I don't know how spazo got a 0.25% student loan... presumably he's being subsidized somehow?

everything i've posted is common sense. and verifiable. i gave you the source--go to the website run by john bogle's (the founder of vanguard) followers and tell me if anything i've posted is wrong. go watch videos of john bogle talk about it. you don't want to believe a 33-year old, go listen to a 80-something year old. bogleheads.org. it's frankly basic math. unfortunately, people are motivated more by fear of loss than by potential to gain. in the face of math, they turn to fear as their only justification for making poor decisions.

 

math has no such sense of fear, so choosing your investments based on fear is like choosing your food based on what letter its name starts with.

 

How is this reply related to what I wrote?

[spazo]

just the first line, really. hope that doesn't offend

[baddomes]

Everyone's a market genius right now. I remember thinking the same thing in 2006.

 

A 0.25% rate student loan just doesn't exist unless that's what you're paying your Dad who lent you the money for school.