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DMala |
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Sleep is overrated
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Reged: 05/09/05
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Posts: 3989
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Loc: Waltham, MA
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Re: So if you had of listened to your Loony Bin Financial Advisor
06/13/11 08:51 AM
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You're kind of talking about two different things. A tax write-off will never be better than not having the debt in the first place. There are cases, however, where you would come out ahead getting a mortgage instead of paying cash.
> I really don't believe that's true. First, in order to "make out better", the return
> on my investment has to be HIGHER than the interest rate on my mortgage. Current
> mortgage rates are around 4.5%, so I'd need to have a return better than that, on
> average over a 30-year period to come out ahead. Bonds don't yield over 4.5%, CD's
> certainly don't, all that's basically left are stocks, mutual funds, and ETFs, none
> of which is particularly stable or guaranteed. Sure, I MIGHT make more in the stock
> market, but I could also lose it all. Over thirty years, it's a huge gamble.
Historically, the stock market has averaged a 10% return, and that includes the Great Depression and all of the other recessions. Sure, if you play the market like a slot machine and try to hit it big, you run the risk of losing everything. But with a properly balanced portfolio, you'll have short term ups and downs, but overall you'll tend towards that 10%. You obviously have to know what you're doing (or have an adviser who does) but it is possible.
> Plus, without a mortgage, I can take the money that I would have spent on the
> mortgage payment each month and invest if I so choose, so I still have the
> opportunity to make some money that way if I want.
This is true, but you'll ultimately make less money overall. There's a notion called the "time value of money". Basically, a dollar in your hand today is more valuable than a dollar you get in the future, because you can earn interest on it that compounds over time. Start with $200,000 earning 10% a year, and you'll have a lot more money after 30 years than if you start with zero and add a little at a time to it over a long period.
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Re: So if you had of listened to your Loony Bin Financial Advisor
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