OT - Money / Investing Thread (aka financial no stupid questions)

[847badgerfan]

If your ROI is roughly 3 points higher than your interest rate, investment makes sense.

You also need to factor in PMI if you're not putting at least 20 percent down.

[FearlessF]

yup, I'll allow my advisor explain it to me, show me the numbers, and steer me in the right direction

that's why I pay him

[MikeDeTiger]

If your ROI is roughly 3 points higher than your interest rate, investment makes sense.

You also need to factor in PMI if you're not putting at least 20 percent down.

Yes.

Also might consider if there's an employer who contributes to a 401k match.  And if you can reasonably project if you'll likely stay in this house or will be moving (selling and buying again) in the future.  Several things could be considered to fine-tune a decision like that, but I think @847badgerfan pegged the main one.  

[bayareabadger]

I think this is what you're seeking (calculator)

https://www.westernsouthern.com/personal-finance/pay-off-debt-or-invest-calculator

Yes. Yes it is!

[bayareabadger]

If your ROI is roughly 3 points higher than your interest rate, investment makes sense.

You also need to factor in PMI if you're not putting at least 20 percent down.

Hmm, so right now I’d need 9-plus percent across a long haul. Or to hope I’d be able to refinance down a few points in the coming years.

Well that’s good to know. 

[betarhoalphadelta]

Hmm, so right now I’d need 9-plus percent across a long haul. Or to hope I’d be able to refinance down a few points in the coming years.

Well that’s good to know.

Yeah, over the past couple of decades, it's been a pretty wide spread in favor of investing. But not at the moment.

S&P 500 has returned on average a little over 10% long term, and around 7% after inflation. So it's better to invest up until that 7% interest rate. But what I'm hearing is that rates are a little over 6% now, so it's close. 

But the possibility to refinance down is helpful. And the fact that the mortgage interest is deductible is helpful. For optionality's sake I'd say put down enough to avoid PMI and keep the rest invested. You have more liquidity options that way--at least as long as the market doesn't nose-dive!

[bayareabadger]

Yeah, over the past couple of decades, it's been a pretty wide spread in favor of investing. But not at the moment.

S&P 500 has returned on average a little over 10% long term, and around 7% after inflation. So it's better to invest up until that 7% interest rate. But what I'm hearing is that rates are a little over 6% now, so it's close.

But the possibility to refinance down is helpful. And the fact that the mortgage interest is deductible is helpful. For optionality's sake I'd say put down enough to avoid PMI and keep the rest invested. You have more liquidity options that way--at least as long as the market doesn't nose-dive!

That’s probably what it ends up being. And I’m sure when we get deeper into the process whoever we work with will have some guidance. 

All in all, a good place to be. 

[847badgerfan]

There is nothing structural or fundamental at this point that would cause a market nosedive.

The choppiness we are seeing in the markets is mostly based on emotions.

[betarhoalphadelta]

There is nothing structural or fundamental at this point that would cause a market nosedive.

The choppiness we are seeing in the markets is mostly based on emotions.

I mean, the concern out there is that the market is largely surfing on the wave of AI right now. If that wave crashes, it's going to take a lot down with it. 

YMMV on whether that's going to happen. As we've talked on other threads, I think this is fundamentally different than the dot com bubble, because this is being built out based on giant companies with giant revenue and earnings, not some speculative nonsense that people are getting massive valuations and VC funding based upon having pretty vaporware slide decks and a registered website.

[MikeDeTiger]

There is nothing structural or fundamental at this point that would cause a market nosedive.

The choppiness we are seeing in the markets is mostly based on emotions.

Eh.....we still like to print money and there are other structural realities that make a crash at least a non-fantasy.

And there's always the nuclear scenario of the dollar losing its status as the reserve currency.  Opinions are very divided on if that has much feasibility of happening, and my opinion on it isn't worth much.  But I suspect that's more a function of the other things I'm referencing, moreso than an additional causal factor in a nosedive.  Just noting that if that happened, we'd need a term much more severe than "nosedive."  

[utee94]

Eh.....we still like to print money and there are other structural realities that make a crash at least a non-fantasy.

And there's always the nuclear scenario of the dollar losing its status as the reserve currency.  Opinions are very divided on if that has much feasibility of happening, and my opinion on it isn't worth much.  But I suspect that's more a function of the other things I'm referencing, moreso than an additional causal factor in a nosedive.  Just noting that if that happened, we'd need a term much more severe than "nosedive." 

Well you have to think about what would replace the dollar, and what it would take globally for that to happen.  And think about how likely that is to happen.

And like you said, if that DID happen, well, none of our financial holdings would matter much anymore and not much else would either.

I don't think the rest of the world is ready to plunge into that no matter how much anti-American sentiment gets stirred up by the usual suspects.

[847badgerfan]

Well you have to think about what would replace the dollar, and what it would take globally for that to happen.  And think about how likely that is to happen.

And like you said, if that DID happen, well, none of our financial holdings would matter much anymore and not much else would either.

I don't think the rest of the world is ready to plunge into that no matter how much anti-American sentiment gets stirred up by the usual suspects.

Exactly.

[MikeDeTiger]

Well you have to think about what would replace the dollar, and what it would take globally for that to happen.  And think about how likely that is to happen.

Right.  Which are of course some of the main points in favor of those who think it's extraordinarily unlikely.  I don't mean to give the impression I disagree.  I mean to say I'm not in a good position to weigh the realistic merits of the possibility, though there does seem to at least be widespread agreement that it's not likely.   

I think one way or the other, it's not a bad idea to put some portion of investments in gold (or other, non-market-related holdings).