Where to Invest Money Right Now?

[dunfree]

No real joke. If you borrow against your 401k, you pay your own account interest on the pay back. If you lose your job, you have a time period to pay it back and if you don’t, you pay income tax and a 10% penalty. Plus it’s not a credit score hit.

The income tax is because you didn’t pay income tax when you contributed though, and the whole thing about 401k is shifting income & tax there on to a time when it will be lower. Not sure how that’s a thing against withdrawals - you had that pretax $ working for you already.

[old goat]

I’m going to disagree with paying down the mortgage early - or at least say it depends on the rate and what you do with the money instead.

My mortgage is 2.75% and fixed for life. The money we saved when refinancing is going into retirement investments, and those investments would be expected to earn much more than 2.75% long term.

Heck, even putting the money in a savings account currently earning 3% is better than paying down the mortgage instead. (Maybe depending on your tax situation.)

You raise a good point. Right now people are sitting on mortgages with historically low rates that we will likely never see again, and if you're in that situation then hanging on to the mortgage may make sense. As far as what your investments would be expected to make--don't be so sure. The run-up in stocks since about 1980, with rapid recoveries from downturns like the Great Recession and the pandemic, has let people get complacent about the risks.

A more important point is that the best investment is dependent on the investors age, income, goals, debts, risk tolerance, the economy etc etc. Where to invest money right now? is an unanswerable question, and I think most of us think of their individual circumstances when making recommendations for other people. (My son was just asking me what I thought about a friend of his who was advised by a CFP not to pay off her 7% med school loans, which doesn't seem like great advice to me.)

[concretejungle]

Post IBM career I bailed on the RE to move to skiing/ drinking beer/ smoking dope/ chasing a woman about one month before RE went in the shitter

then I forgot to re-invest the RE procedes which means I was entirely in cash when the stock market crashed 6 months later

I ended up looking like a fucking RE/ stockmarket genius but my timing of the markets was entirely based on sex booze & drugs which i don't recommend but it worked for me

my point would be that picking the market seems pretty arbitrary

Every fucking time with this tale.

[Mustonen]

Every fucking time with this tale.

Who would have thought it would have so many uses?!

[bennymac]

Every fucking time with this tale.

dementia can't be all bad - you get a chance to meet new people every day

[rod9301]

I would be all for paying off a mortgage.

Having a mortgage and investing the proceeds is equivalent to investing with borrowed funds, ie margin.

I read a study a few years ago that showed that borrowing money to invest had never worked out. The study was done over 700 years or so.



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[Conundrum]

The income tax is because you didn’t pay income tax when you contributed though, and the whole thing about 401k is shifting income & tax there on to a time when it will be lower. Not sure how that’s a thing against withdrawals - you had that pretax $ working for you already.

The point I was subtly trying to make. Not a lot of downside (10% penalty worst case vs what interest on cc cash advance or short term loan). I guess we all define our emergencies and what we're willing to do to get out of them. Back to some cash and a passport in an envelope...

[J. Barron DeJong]

I would be all for paying off a mortgage.

Having a mortgage and investing the proceeds is equivalent to investing with borrowed funds, ie margin.

I read a study a few years ago that showed that borrowing money to invest had never worked out. The study was done over 700 years or so.



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Fuck you’re a moron. Maybe you can get some financial advice from Cono.

[J. Barron DeJong]

You raise a good point. Right now people are sitting on mortgages with historically low rates that we will likely never see again, and if you're in that situation then hanging on to the mortgage may make sense. As far as what your investments would be expected to make--don't be so sure. The run-up in stocks since about 1980, with rapid recoveries from downturns like the Great Recession and the pandemic, has let people get complacent about the risks.

A more important point is that the best investment is dependent on the investors age, income, goals, debts, risk tolerance, the economy etc etc. Where to invest money right now? is an unanswerable question, and I think most of us think of their individual circumstances when making recommendations for other people. (My son was just asking me what I thought about a friend of his who was advised by a CFP not to pay off her 7% med school loans, which doesn't seem like great advice to me.)

I think you need to look at risks and probabilities. Paying of your 7% loan is the equivalent of a guaranteed 7% return; you’re not going to get anywhere near that kind of return from any investment, so you should pay that off first.

However, in my instance I have more than 20 year before retirement. I don’t think there’s ever been a 20 year period where stocks haven’t returned more than 2.75%, so it’s a pretty safe bet that putting the money into a stock index fund is going to provide a better return for my timeframe than paying off the mortgage would.

[bennymac]

I would be all for paying off a mortgage.

Having a mortgage and investing the proceeds is equivalent to investing with borrowed funds, ie margin.

I read a study a few years ago that showed that borrowing money to invest had never worked out. The study was done over 700 years or so.

[old goat]

Fuck you’re a moron. Maybe you can get some financial advice from Cono.

I have to agree with Rod--few people have the discipline and risk tolerance to earn more from their investments than their mortgage interest--nor was it easy to do until recently. Rod (I think) and I (definitely) are old enough to remember both double digit CD's and double digit mortgage rates. Which certainly affects our financial perspectives. The super low mortgage rate and inflation of recent years will affect the fianancial decisions of more recent generations for years to come as well, long after those conditions are gone (which is already.)

[liv2ski]

Much truth there OG. We are all going to do what our experiences lead us to believe. My average mortgage rate was likely around 8%, so I was always very motivated to close that debt out asap. At 2.75%, likely not.

[J. Barron DeJong]

I have to agree with Rod--few people have the discipline and risk tolerance to earn more from their investments than their mortgage interest--nor was it easy to do until recently. Rod (I think) and I (definitely) are old enough to remember both double digit CD's and double digit mortgage rates. Which certainly affects our financial perspectives. The super low mortgage rate and inflation of recent years will affect the fianancial decisions of more recent generations for years to come as well, long after those conditions are gone (which is already.)

It could certainly be a generational thing, but if you’re currently holding a mortgage over 4% you probably did something wrong. If your mortgage is under 4%, you’re probably better off putting the money into retirement instead of mortgage.

I still think rod is a moron.

[yeahman]

Dayum - where you getting 3% for savings?

I am getting 3.5% from Lending Club. Seems like every month I get another email telling me they are raising my interest rate.

[jackstraw]

Yes. As every good financial adviser says: Try to time the market! Pick individual stocks!

FFS.

What's so hard about that?

[J. Barron DeJong]

What's so hard about that?

In case anyone misses this:

[old goat]

It could certainly be a generational thing, but if you’re currently holding a mortgage over 4% you probably did something wrong. If your mortgage is under 4%, you’re probably better off putting the money into retirement instead of mortgage.

I still think rod is a moron.

I don't disagree, except about Rod. (Better hope he doesn't challenge you to a ski-off; you wouldn't have to worry about long term investing)
My point is that investing is very psychological (there was a Nobel Prize for that insight) and is very much affected by our experiences when we're starting out. Why do so many people buy high and sell low? If someone is the kind of person that checks their portfolio every few days a CD might be a good idea.

[J. Barron DeJong]

I don't disagree, except about Rod. (Better hope he doesn't challenge you to a ski-off; you wouldn't have to worry about long term investing)
My point is that investing is very psychological (there was a Nobel Prize for that insight) and is very much affected by our experiences when we're starting out. Why do so many people buy high and sell low? If someone is the kind of person that checks their portfolio every few days a CD might be a good idea.

Maybe we’re talking past each other, or maybe just coming from a different perspective, but I agree that psychology is an issue, which is exactly why I think it’s a bad idea to try to time the market or pick individual stocks. Your psychology is likely to lead you astray. Much better to make everything as automatic as possible to keep emotions out of it.

[rod9301]

I don't disagree, except about Rod. (Better hope he doesn't challenge you to a ski-off; you wouldn't have to worry about long term investing)
My point is that investing is very psychological (there was a Nobel Prize for that insight) and is very much affected by our experiences when we're starting out. Why do so many people buy high and sell low? If someone is the kind of person that checks their portfolio every few days a CD might be a good idea.

He thinks I'm a moron because i think there should be peace talks in Ukraine instead of senseless killings.

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[bennymac]

a lot of people are mad at Ukraine for not wanting "peace" on Russia's terms

[J. Barron DeJong]

He thinks I'm a moron because i think there should be peace talks in Ukraine instead of senseless killings.

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That’s true - except I’d suggest the Ukrainians don’t consider their fight to be senseless.

But it’s also because you suggested timing the market while claiming you weren’t suggesting timing the market.

[old goat]

Maybe we’re talking past each other, or maybe just coming from a different perspective, but I agree that psychology is an issue, which is exactly why I think it’s a bad idea to try to time the market or pick individual stocks. Your psychology is likely to lead you astray. Much better to make everything as automatic as possible to keep emotions out of it.

I agree 100% with not timing the market. I buy when I have cash sitting around. I sell when I need the cash. I look at my statements when I do my taxes. Psychology absolutely leads people astray. But you can't ignore it. You have to account for it.

[rod9301]

Buying when stocks are below fair value is not timing the market.

Buying stocks when they are expensive will not provide good returns.



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[4matic]

I agree 100% with not timing the market. I buy when I have cash sitting around. I sell when I need the cash. I look at my statements when I do my taxes. Psychology absolutely leads people astray. But you can't ignore it. You have to account for it.

At your age bonds are no brainer but if 50% drawdown doesn’t change your lifestyle let it ride. 60/40 up 10% last 30 days.

[J. Barron DeJong]

Buying when stocks are below fair value is not timing the market.

Buying stocks when they are expensive will not provide good returns.



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How is that not timing the market? What’s your definition of timing the market if it’s not that?

Of course buying something that undervalued and selling something overvalued is a good strategy. The problem is that basically no one can achieve that consistently in practice.