Comments on: Pre-pay mortgage principal vs invest in mutual funds? http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/ Thu, 09 Feb 2012 00:24:06 -0800 http://wordpress.org/?v=2.8.5.2 hourly 1 By: Ted http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/comment-page-1/#comment-32782 Ted Wed, 17 Mar 2010 19:01:40 +0000 http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/#comment-32782 At age forty, you are entering the highest earning period of your life. This means that tax deductions will be worth the most to you. By paying extra on your mortgage, you are giving up some of the home interest tax deduction. Capital gains are tax deferred and get a special rate after they become "long term". By not putting the 350 into a stock mutual fund, you are giving up these two tax benefits. Owning your home free and clear can be a nice feeling, but this feeling comes at the expense of paying more in income tax than you need to and ending up with total less savings when you're sixty. Put your money in the Vanguard S&P 500 index fund. The market is at a near term low and will explode once the housing crisis is over. Every market correction looks horrible when you're in it, but the market always recovers and goes up. Those who are patient, win big. At age forty, you are entering the highest earning period of your life. This means that tax deductions will be worth the most to you. By paying extra on your mortgage, you are giving up some of the home interest tax deduction. Capital gains are tax deferred and get a special rate after they become "long term". By not putting the 350 into a stock mutual fund, you are giving up these two tax benefits. Owning your home free and clear can be a nice feeling, but this feeling comes at the expense of paying more in income tax than you need to and ending up with total less savings when you’re sixty. Put your money in the Vanguard S&P 500 index fund. The market is at a near term low and will explode once the housing crisis is over. Every market correction looks horrible when you’re in it, but the market always recovers and goes up. Those who are patient, win big.

]]> By: robe http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/comment-page-1/#comment-32783 robe Wed, 17 Mar 2010 19:01:40 +0000 http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/#comment-32783 That depends on your age and your goals. Housing could continue to devalue for a year, or perhaps more, and if you earned on your mutual fund you'd be money ahead by a wider margin than normal rather than pouring money into a depreciating hard asset. On the other hand, if you're finding it hard to generate a consistent return, you may be at an advantage to pay off your house earlier. Without knowing your age, your tolerance for risk, and the reliability of long term external employment and/or income stream, it's hard to answer further. Consult a financial planner for advice specific to your local market. That depends on your age and your goals. Housing could continue to devalue for a year, or perhaps more, and if you earned on your mutual fund you’d be money ahead by a wider margin than normal rather than pouring money into a depreciating hard asset. On the other hand, if you’re finding it hard to generate a consistent return, you may be at an advantage to pay off your house earlier. Without knowing your age, your tolerance for risk, and the reliability of long term external employment and/or income stream, it’s hard to answer further. Consult a financial planner for advice specific to your local market.

]]> By: The Magus http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/comment-page-1/#comment-32784 The Magus Wed, 17 Mar 2010 19:01:40 +0000 http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/#comment-32784 Like a lot of things this depends on many variables. I like David Ramsey's "baby steps" as a good starting place. If your going to invest in mutual funds please look for "no load index funds" as your first choice. No load means no sales commission. Index funds means they are "un-managed" so your not paying for a manager. Inspite of being "un-managed" these funds regularly out-perform most of the managed funds in the same category's. A low-cost mutual fund doesn't take as much of your gains in annual fees as the high cost ones do. Vanguard was 1st started with this in mind as still does it. Like a lot of things this depends on many variables. I like David Ramsey’s "baby steps" as a good starting place.

If your going to invest in mutual funds please look for "no load index funds" as your first choice. No load means no sales commission. Index funds means they are "un-managed" so your not paying for a manager. Inspite of being "un-managed" these funds regularly out-perform most of the managed funds in the same category’s. A low-cost mutual fund doesn’t take as much of your gains in annual fees as the high cost ones do. Vanguard was 1st started with this in mind as still does it.

]]> By: jeff410 http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/comment-page-1/#comment-32785 jeff410 Wed, 17 Mar 2010 19:01:40 +0000 http://investing.hirby.com/pre-pay-mortgage-principal-vs-invest-in-mutual-funds/#comment-32785 You dont want your mortgage to continue into retirement, when your taxable income would supposedly decrease and so would the tax incentives of the mortgage. Real estate and mutual funds are two different asset classes and diversification is usually best. I would say keep paying a little extra on your mortgage and put some in mutual funds. With that time horizon it may be a good idea to stick with mainly large cap funds, growth and income and short term bond funds. You dont want your mortgage to continue into retirement, when your taxable income would supposedly decrease and so would the tax incentives of the mortgage. Real estate and mutual funds are two different asset classes and diversification is usually best. I would say keep paying a little extra on your mortgage and put some in mutual funds. With that time horizon it may be a good idea to stick with mainly large cap funds, growth and income and short term bond funds.

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