Actuarial Outpost
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Finance - Investments > Non-Actuarial Personal Finance/Investing
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

Thread Tools Search this Thread Display Modes
Old 07-17-2018, 06:03 PM
Mr F's Avatar
Mr F Mr F is offline
Join Date: Jun 2009
Posts: 4,766

Originally Posted by Egghead View Post
By "liquid asset that provides some modest returns," are you suggesting something super safe? Or taking on a bit more risk for better returns?

This strategy is appealing to me more and more.
If it's me, I'm probably not parking it into a savings account and I'm probably not putting it in an equity fund either. I don't have one off the top of my head without looking more. Maybe a bond fund or some shorter term fund that someone has put together?

It certainly isn't risk free in any case, but I'm okay with some investment risk, and wouldn't feel like I HAD to pay off in 3 years and take a loss if investments dipped (nor would I feel dumb if that happened). Adjust to your preferred investment risk tolerance. If you want to know what I'm actually doing, it's something similar with a longer time horizon since I'm younger. I pay enough ahead now to be on track to pay off in 17 years when Little F goes to college, rest goes into a total market fund.

I do think your biggest problem (with what you've described) is liquidity though, and coupled with your description of your spending that's scary to not have anything outside of retirement/college investments to get you through. I'd fix that first.

Last edited by Mr F; 07-17-2018 at 06:22 PM..
Reply With Quote
Old 07-17-2018, 08:43 PM
yoyo's Avatar
yoyo yoyo is offline
Join Date: Dec 2001
Posts: 21,916

yeah, it sounds like you need a solid emergency fund and a good budget. get those squared away first. live with and within your budget for 3 months or so to establish the habits. only then should you be thinking about the mort thing and the other options discussed here.

it's imperative that you and mrs be on the same page throughout. she needs to be involved in getting the emergency fund filled and setting the budget

i don't think i appreciated/understood to what extent the basics hadn't been covered first. retiring the mort v more invested needs to take a back seat until those other things get settled.

good luck, you can do this
Reply With Quote
Old 07-17-2018, 11:45 PM
d123454321 d123454321 is offline
Join Date: Jan 2011
Posts: 1,084

It doesn't have to be one or the other.

Say one has X extra per year during high earning years.

The person can put 0.5X into other investments, and 0.5X into paying down mortgage quicker.

After 3 years, they would have more mortgage paid, and 1.5X into investments, even if markets dropped sharply, say 50% which is likely a worst case scenario, since the investments aren't all at once, but done monthly to catch smoother prices, the person would still have 0.75X of additional liquidity even if they had to sell other investments.

I am younger, so I am totally in favor of having large mortgage and investing rest. As one nears retirement, I can see leaning towards paying down mortgage.

If one is going to invest, assuming they normally would look at stock/bond mix, it may not make sense to do anything but put all investment in equities, because bonds are just horrible for tax efficiency if it's in taxable account.

I mean, if someone had say $50K and wasn't sure to pay down mortgage or invest it, and say they decided to put the $50K in diversified investment of say 50/50 stocks bond, I think that is possibly misguided. May make more sense to just put 25K to pay down mortgage, and other 25K into stocks, for 50/50 blend, and think of mortgage as fixed income allocation. I assume the decision of alternative investments is done in taxable account, and bond/fixed income investments are grossly tax inefficient, I can't imagine they meaningfully outperforming a mortgage rate on after-tax basis, especially when accounting for the risk. Unless the bond portion is solely for liquidity, then it can have a rationale, but for smoothing investment risk, it seems bad. Blend of Investment grade bonds now yield about 4% roughly, and that's about where mortgage rates are.

Last edited by d123454321; 07-17-2018 at 11:49 PM..
Reply With Quote
Old Yesterday, 09:57 AM
Egghead's Avatar
Egghead Egghead is offline
Join Date: Aug 2006
Posts: 6,204

Originally Posted by d123454321 View Post
It doesn't have to be one or the other.

Say one has X extra per year during high earning years.

The person can put 0.5X into other investments, and 0.5X into paying down mortgage quicker.
This could be a nice compromise.
Reply With Quote

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

All times are GMT -4. The time now is 07:25 AM.

Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.12160 seconds with 9 queries