So, how are your investments doing?
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Posts: 2873
Location: Western Hemisphere
Posted on: 05-11-09 14:22:25
Location: Western Hemisphere
Posted on: 05-11-09 14:22:25
Quote:
Originally posted by JRF
My way of thinking is "the home you reside is not an investment", you need to secure that. Once it is secured, you will have the independence to make decision that you deem risky when having commitments such as mortgage.
This brings up another question (from the textbook). The financial pyramid recommends, Security (insurance, will), Independence (home ownership, debt elimination, etc) and then investment.
I've never had Life insurance. With 2 working spouses, I've never felt the need. Any thoughts of me skipping the bottom and the first step of the pyramid? Thanks.
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Dimple2001
Quote:The answer to that question depends on what else will you do with the money that you aren't putting towards your mortgage principal?
Originally posted by Smiley
but would't it be better to convert it to low fixed for 30 years and not pay extra principal every month and be insured from rising rates in the future.
There are more important needs, such as insurance, emergency cash savings, etc. so if those are not taken care of that takes priority.
Potentially, kids' education savings can be higher priority as well.
Other than that, all you can do is invest that in the market (stocks, bonds, etc.).
Mortgage prepayment provides immediate, guaranteed returns on after tax money.
Even if you are currently paying a low mortgage interest, you can get better bang for your buck paying down mortgage than trying to invest it in the open market.
Think about it this way - the bank is loaning you money at 3% (for example).
If the bank thinks they can make 3% or more in the market consistently, why would they loan you money at 3%?
The fact that interest rates are so low are also indicative of the fact that banks do not believe they can make more than that out in the market.
So when banks, with all the expertise, leverage and financial power at their disposal, cannot make more than 3% out in the market, how can a simple, retail investor like you can - consistently year after year for 30 years (or whatever your loan term is).
Going back to what we started discussing, if someone can make 10% annualized, after tax returns for 30 years, that'll be awesome and such a person may be better off keeping the mortgage at 5% for 30 years and using that leverage make 10%.
Even then, though, the net profit is still 5% (actually less since conventional mortgage is compounded semi-annually).
Worth all the time, risk, hassle, heartburn, etc?
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:To answer that, ask yourself the very unpleasant question - will everything be financially ok with your family in the event of your untimely death?
Originally posted by dimple2001
I've never had Life insurance. With 2 working spouses, I've never felt the need. Any thoughts of me skipping the bottom and the first step of the pyramid?
If the answer is that all their needs will be met (basic needs, education, lifestyle, etc.) then you don't need insurance.
But if not, then one of you should have insurance.
You could also have joint policy if you like.
I think the pyramid that you refer to is largely correct and makes general sense.
Of course, everyone's life circumstances are different.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:
Originally posted by dimple2001
With 2 working spouses,
-I dont think its legal in Canada to have 2 spouses.. ( I am not debating the working part)...
JK...I know what you mean.
Hiren
Posts: 2873
Location: Western Hemisphere
Posted on: 05-11-09 17:24:10
Location: Western Hemisphere
Posted on: 05-11-09 17:24:10
Quote:
Originally posted by hchheda
JK...I know what you mean.
Hiren
The more the merrier, I say. Maybe, I'll get my high returns, after all, of course, with higher risk
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Dimple2001
Quote:
Originally posted by hchheda
Quote:
Originally posted by dimple2001
With 2 working spouses,
JK...I know what you mean.
Hiren
Haha.....I too noticed it earlier. :
Posts: 2873
Location: Western Hemisphere
Posted on: 06-11-09 16:16:36
Location: Western Hemisphere
Posted on: 06-11-09 16:16:36
patrickm - thank you for your feedback.
1. Has anyone used or is anyone using questrade for stock trading? If so, any feedback on your experiences?
2. Has anyone been or is a client through Edward Jones? If so, how is it working for you?
Thanks.
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Dimple2001
