Originally Posted by
Verdell
Sure, so you agree that, for any given investor, some balance exists for risk tolerance. Surely you would never borrow money on a large scale at one rate just to throw it into a bond at a lower rate, just to keep it "accessible."
Everybody's risk tolerance is different. I'd put extra towards my 6% mortgage before I'd ever put it into 4% bond, as part of a balanced strategy that suits me, for example. Max 401k into ETF types, a nice cherry on top to each mortgage payment, and everything leftover into a brokerage/crypto which is where I get to play and get risky. It works for me, and I lose zero sleep over wishing I paid less into the mortgage and more into my risky brokerage/crypto plays.
"Balanced" is not one-sized-fits-all, nor is it all-or nothing.
This post, especially the bolded part is likely where some of the paid off mortgage opinions differ. Old guys like me (GenX) are more likely to be sitting on sub 3% mortgages and can get a better return on cash than paying down a mortgage. Millennials and GenZ are more likely to have newer mortgages at 6% where the math is different. A sub 3 mortgage offers a 7% spread to the S&P historical returns. A 6% mortgage only offers a 4% spread. Said differently, my "risk free rate of return" is 2.25% by paying off a mortgage. Verdell gets a 6% "risk free rate of return".
I'd been a no car payment guy for years, but in 2022 money was free (1.9%) I hate having a stupid car payment, but he!! if I'm taking money out of a money market account to pay it off. I'm just letting it ride for another year or two. Yes, I tried the all cash option, but the dealership makes money originating loans. My latest car purchase, I got a better deal by taking a 6% car loan, then paid it off a week later with cash. That was my 6% risk free rate...