investorjunkie wrote:3CT_Paddler wrote:
Anybody have another place to get a risk free return north of 1 or 2% right now?
This is recency bias. What matters isn't now, what matters is 5+ years from now if we are doing long term investing.
There are plenty of dividend stocks that generate +3% and dividend aristocrats, just to give one specific example.
There is no such thing as a "risk free" investment at least in terms getting you money back in real dollars. Sure you can put your money into a 10 year treasury, but you really think you'll do better than the rate of inflation?
I am not sure who has the recency bias. Your website compares paying a mortgage off to getting 8 percent returns .... no brainer. the initial post, comparing paying off mortgage quickly to 6 percent returns. Again, a no-brainer.
Sure, stocks have given such returns over the past several decades ... but the recency argument suggest you believe they will continue to do so. The recency argument suggests bond yield will go back up. They never did in Japan ... which had its stock market just hit a 28 year low. (was once the worlds second largest economy).
28 year low!
Big money investors are suggesting otherwise when they buy 30 year bonds at 2.5% or lend out to homeowners at 3.5% (but this involves additional risk). Higher returns are gotten only by taking additional risk. Even stocks with 3% dividends have more risk.
I keep coming back to this point, the firms that make loans can do lots of things with there money but think making loans at low rates (ridiculously low, in my view). If markets are efficient, then the risk/return of making such loans is viewed favorably.
Plus, any non-aggressive equity / bond split ... say 65 / 35 means 35 percent of your investments are in bonds, with government bonds being the lion share of TBM. On that portion of your money, you will be borrowing at 3.5 percent or so, to get something well south of that on a third of your investments.
Perhaps I or someone should start a separate thread on what are reasonable investment returns for the next 3 decades.
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To my way of thinking .. the tax argument is the best reason not to pay off the mortgage if you have room in tax deferred accounts. The higher returns elsewhere goes against my belief in efficient markets.
"Owning the stock market over the long term is a winner's game. Attempting to beat the market is a loser's game. ..Don't look for the needle in the haystack. Just buy the haystack." Jack Bogle