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      10-04-2019, 03:36 PM   #36
G35POPPEDMYCHERRY
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Quote:
Originally Posted by Run Silent View Post
Because you are failing to factor in risk. You wouldn't take out a second mortgage to invest in the stock market would you? Same thing.

Here is a good analogy:

Scenario: If you have $1 million in the bank, why would you take $300,000 out to buy a house for cash instead of just putting 20% down and keeping the money in the mutual fund to make money? If need be, you can pay off the house.

Answer: The spread that youíd make between the mortgage (at 4%) and the mutual fund )at (8% or so) is about 4%, and thatís assuming nothing goes wrong and that you can get your mutual fund out if you need. The problem here is that this is just all theory, and what Iím talking about is actual life. In theory, youíve left out two major issues Ö paying taxes on the mutual fund (which makes your yield less) and risk.

Youíve compared a zero risk investment with a risk investment, and you donít do that. You must factor in risk so you accurately compare one investment to another. Every time you pay your mortgage off, the bank no longer charges you interest. Thatís a zero risk, compared to a mutual fund that does have risk. Unless someone is a fool, you would not borrow $300,000 against your home to invest in mutual funds.

I agree there is risk; and no one can define one's risk or how much money is enough.

what mutal fund gives 8%?

I've been making back at least 5% on div every year; mind you its only been three years since I started earning investing.

maybe that risk isn't worth it for some people. I have enough other liquid to cover the note if somehow my portfolio goes 100% bankrupt.