Investment BS Thread - Stocks/Futures/Mutual Funds/Bonds/Commodities/Options/ETFs/401ks/Etc

And see I would never recommend anyone cash out anything out of investments to pay for planned expenses like vehicles. All my investments are in retirement, and I am a believer there is no excuse to touch that money for anything but retirement.

I save for new vehicles off the side out of my disposable income. When I know I will need to replace a vehicle then I just say Ok I need to put $300-$400 a month aside for the next 3-4 years to start saving for a new vehicle. (I am so not at a point right now where a $50k vehicle is a wise purchase)

I don't look at it as the difference between cashing out investments vs. financing. It's simply being intentional about saving so you don't need to touch investments nor change how much you contribute to investments.

Now I'm not one of those guys that thinks investing is fun. I save in plain ol savings accounts if I'm planning on using it in the next 5 years (usually it's going to be 3 years or less). I don't have a bunch of different accounts going for different things. I'm not that savvy with it. It sounds like you definitely are.

Also the way I see it... if writing a $50K check for a truck causes you too much pain... it's probably a good indication that you are buying to much vehicle. Whether that's because you can't afford it or because your goals indicate you should be keeping that money invested.
I think debt enables people to make decisions they probably shouldn't be making.

 

I deleted my post after you quoted it I guess lol I think I am just saying the same thing over and over. Which is fine I guess, this is a good discussion.

I will just say this, that few hundred you set aside for a few years to save for a vehicle could be invested and compounding over those years. You'll end up significantly ahead in my opinion.

This truck that I have is the first vehicle loan I have ever taken. I have always paid cash, and liked the simplicity of it. I have spent the last year or so learning about investing (catching up I guess, since I knew nothing before), and I only wish that I had invested the money I spent on vehicles. I couldn't even imagine what I'd have now if I had started 10 years ago. It's all about time, compounding will work miracles. That's why drawing out big purchases at low interest rates makes sense, because you can put more money into the market and let it do its thing.

 

Right now my primary focus is mortgage pay off. So all my funds are being pilled into that after my basic expenses and my retirement savings.

When I'm debt free 100% and I've got a good income and savings goals for newer cars and an upgraded home for cash, I probably need to be looking at some more sophisticated means of saving. My fear is I just don't want to invest in anything that will lose me money when the money may only be there short term (and I need to be continuously contributing to it).

There are some money things I surely could be doing better in the future and I need to learn how to do that.

 

I like the book "Rich Dad, Poor Dad."

I read some reviews on it after I read it, a lot of people hated it. Complaints about how it didn't tell them which stocks to pick or which buildings to buy, so it was worthless to them.

I think it's one of the best books you can read for this sort of thing. It teaches you how to think. You have to figure everything else out (plenty of stock or real estate books for that), but it teaches the mindset you need to have.

 

I like your take on finances. But I think your approach only works if you are an extremely premeditated, forward thinking, and disciplined individual. The foundation of your logic is that if you plan well enough, and have enough buffer there is no such thing as an unexpected expense because you have planned for it and have a dedicated an account for that purpose. I am, for the most part, in this boat myself. However, there are instances and circumstances that require a more broad pint of view. Moreover, how you choose to invest that money until its needed for your intended purposes can vary.

Im on both your side and @Boyk1182 's side, and I think you guys are saying the same thing. Never touch your retirement saving until retirement. Plan ahead for future expenses. And to add the this mindset, which is the point @Boyk1182 is making, if possible and safe, why not invest this money until its needed? You can do anything from a money market account, to a high interest savings account, or some people will argue that broad market etfs make sense too. Who knows, maybe you make a few extra thousand and when you need that new car, you have some extra unexpected cash that allows you to have more options. These are the ideas that will accelerate your already near-perfect wealth management habits.

 

I forgot you posted this on the first page. teeheehee. Changed your mind I see?

 

I would add one thing to this, just the way I do things personally. I have 33 individual stocks right now, and there's a reason I do it this way as opposed to just buying a broad market ETF. I do it for control over dividends, but there's another reason. Right now, I'd say 2/3 of my holdings are up (some a lot), and 1/3 are down. I try to avoid it if possible, but if I need money, I can sell shares from those 20+ stocks that are up. I know that a deep recession would make selling at a gain impossible, but in the average market I always have something to choose from that is up and I can sell. I just don't think it would be that easy with ETFs, if they're down you might not want to take the loss. I like how investing is personal and can be crafted for anyone's needs, many would disagree with my method and I'd disagree with theirs, but they both work for the intended purposes.

 

Not of the mindset that paying off a mortgage is always a good thing. Now that standard deduction tax laws have changed and been increased, it is a good idea for many folks to pay off mortgage debt due to no additional tax benefit.

For me, I have 20+ years to work. I need a tax shelter. So I maxed out the mortgage deduction and bought a way bigger house than I need close to the beach. I have the best chance to maximize appreciation over the next 20 years and can shelter the maximum amount of income.

All retirement accounts are maxed out each year 403B,457, and Employer Retirement Plan. When I retire, I will sell this house and downsize to a condo/townhome that I can lock up and leave. We'll change our permanent address out of California and should be set to live very comfortably.

 

Do you have the ability to do a deferred comp retirement plan? These are the ultimate tax shelters.

 

That's what the 403b and 457 are. They are both maxed.

 

You are aware the mortgage deduction is a deduction and not a credit right??

You pay more in mortgage interest than you get in tax savings.

 

Not when you invest that money and earn more than the 3.75% or 2.25% effective interest rate on the mortgage after the income tax benefit.

ARBITRAGE!!!

 

Thats a different issue. You said it was adventageous to have a mortgage for the tax break. Which is untrue considering there are no 100% tax brackets.

 

That’s 30 years of compounding!

 

Okay, gothca.

The tax break makes it advantageous to be able to use the funds to increase wealth with lower risk and at the same time be much more liquid.

 

I was just wondering, so...

If you’re paying $500 a month extra on a mortgage (towards principal), you’ll pay it off sooner, which is great. That’s a big expense gone, and would feel great.

If you put $500 a month into SPY, based on average returns, you’d have a little over $1m at the end of 30 years. You can rebalance that into a conservative portfolio that pays 5% a month, and you have a perpetual $4,100 a month income. That’s without ever selling a share, or buying any more, just a deposit that’s keeps coming in.

Holy shit that’s more than I expected.

 

Thats if we live in a world with no risk of illness, job loss, or other extenuating emergencies where one could lose a home to foreclosure.

I think this is just like the auto loan issue. Not so much a math issue of pay off early vs invest more to overcome the interest loss on the home. Its more of a behavior issue of people overbuying in home, having 30 year terms to increase affordability of a home, and not being able to have a good EF.

I’d like to see an algorhythm showing all the factors of a 30 yr mortgage on paying off asap vs investing that whole period.
Including things like inflation and property value.

 

I think the OP did something like that many pages back (someone did, it had charts and all).

I just wanted to illustrate what can happen if you can do it. I know that many things can happen to derail someone. I say shoot for a lot more than $500 a month if you can, and speed the process up. Do it while you’re young and try to retire in your 40’s.

 

Healthcare is the single biggest limiting steps to retirement in the 40’s. Kids are the second. Unless you have a really low standard of living.

 

I have the VA, I guess I got lucky (running over an IED in Iraq got it for me though, so maybe not lucky). Maybe that’s why I see things different, I don’t have to factor that cost in, and I know it can be expensive.