Investment Questions

Rot 911 · 08-13-2007, 05:21 AM

Now that I am back on course with employment I have a more pleasant problem. Where to invest some extra cash. The only debt my wife and I have is our house everything else is paid off. We invest every month in some mutual funds through deferred compensation. Not sure with the volatility of the market that we want to increase money in that area.

Right now you can get short term certificates of deposit paying over 5%. Or would it be a better idea to work on paying down the house? I could spend it all on drugs and whores, but the wife might not like that idea. Open to all suggestions. Thanks!

motion · 08-13-2007, 06:56 AM

Kurt,

If you're not sure where to put it, stick it in an Orange or Countrywide savings account. They're paying over 5% and you don't have to worry about CD terms or penalties for early withdrawals. You can link them to your checking account online and transfer money back and forth. Really sweet. If you plan on staying in your house forever and paying it off, I'd start chanelling the money in that direction.

dmcummins · 08-13-2007, 07:08 AM

I paid my house off a few years ago and I don't regret it. It would depend on what rate you have now if it makes any sense. I generally just continue to spread mine around, some stocks and bonds. If your uncomfortable with the swings in the market at this time CD's wont hurt you.

Or you could spend it on golf or a boat.

Mo_Gearhead · 08-13-2007, 07:15 AM

QUOTE: "I generally just continue to spread mine around, some stocks and bonds."
____________

+1

Do your own research and make your own choices. In over 40 years of investing the three biggest losses I encountered were 'tips' from friends/acquaintances.

Make your choices ...live with the results. No one to blame but numero uno.

turbo6bar · 08-13-2007, 09:16 AM

Second lotion's recommendation for a high-yield savings account. Make sure you have FDIC insurance and don't go with a money market account unless it has FDIC insurance. Too many money markets managers have funds invested in mortgage backed securities, or worse yet, collateralized debt obligations.

Max out your tax-deferred accounts and then invest the rest where ever you like. I think one could make equally convincing arguments for paying off mortgage debt OR dollar-cost averaging into equities.
good luck, jurgen

KFC911 · 08-13-2007, 09:20 AM

Quote:

Originally Posted by Kurt V

.... I could spend it all on drugs and whores, but the wife might not like that idea. Open to all suggestions. Thanks!

Tell the wife that you're INVESTING in drugs and whores

? It is an "up and down" market ya know....

ps: I'm from the "debt free" camp btw...it's a nice camp.

Porsche-O-Phile · Porsche-O-Phile's Garage

Buy gold and foreign stocks. I see us going into an economy where (1) "Cash is king" and (2) the U.S. dollar is going into free-fall against other currencies. I'm actually shifting a lot out of domestic stocks into foreign stuff and precious metals now in anticipation of a prolonged recession.

Rot 911 · 08-13-2007, 10:55 AM

Thanks for all the suggestions guys! I leaning towards paying off as much of the house as I can. I think it is the last house we are going to buy and it would be nice not to have a house payment. Porsche O Phile, I am already buying foreign stocks through a mutual fund. I think I will also take Motion's and turbo's advice and move some cash into a high interest savings account that links to checking.

Keep the suggestions coming!

pwd72s · 08-13-2007, 11:59 AM

Kurt...get thyself to Amazon...BUY THIS BOOK!

The Bogleheads guide to investing
by Taylor Larimore, Mel Lindauer and Michael LeBoeuf

I also agree with paying off the mortgage. When out of debt,
one has more $ to invest...

Bottom line...don't chase rainbows, and diversity is good. By that, I mean a mix of cash, bonds, and equities. The easiest way for the little guy to diversify is through no load mutual funds.

Moneyguy1 · 08-13-2007, 12:44 PM

Some contrarians here...a breath of fresh air.

einreb · 08-13-2007, 01:27 PM

I find the decision to pay down the mortgage a tough one. Its easy to argue either way. I'm suspicious of those that make money off my investments saying that I shouldnt pay it down. The mutual fund industry doesnt make money off you paying down your mortgage.

For me at 36 with a decent bit socked away already, I lean towards paying mine down rather than adding to additional taxable investments. I supect that I won't 'come out ahead', but I feel better about it.

frogger · 08-13-2007, 02:06 PM

Booze and hookers, Kurt. Booze and hookers.

on2wheels52 · on2wheels52's Garage

A number of my customers tell me they buy lottery tickets.
Jim
Mt. Home Gun & Pawn

pwd72s · 08-13-2007, 04:52 PM

Quote:

Originally Posted by einreb

I find the decision to pay down the mortgage a tough one. Its easy to argue either way. I'm suspicious of those that make money off my investments saying that I shouldnt pay it down. The mutual fund industry doesnt make money off you paying down your mortgage.

For me at 36 with a decent bit socked away already, I lean towards paying mine down rather than adding to additional taxable investments. I supect that I won't 'come out ahead', but I feel better about it.

Good thinking. Especially the "taxable investments" part. It sounds like you max out on your tax sheltered investment opportunites every year. If that's the case, I tip my hat to you.

It's basic numbers crunching...say your home loan interest is 6%...and the market only goes up 3% in a given year....or worse, even down...if you're into "buy and hold" mode with equities.

Oh yes, realtors love to talk of the "tax reduction" of a mortgage...crunch the numbers there as well...the savings aren't that great, and the lower your income bracket, the less those savings are.

YES! IF it's the home you wish to stay in, pay that rascal off....it's a great feeling. Our home has been paid off since '93, yet every once in a while, I'll ask Cindy if we have money for the house payment....

pwd72s · 08-13-2007, 04:55 PM

Quote:

Originally Posted by Wayne at Pelican Parts

I have diversified greatly away from the US dollar - I suggest that everyone else do the same to have a balanced portfolio. I think it's a 40/60 ratio now of domestic / international.

Thx,

Wayne

Pretty volatile thinking Wayne...but you're young enough to take on the risk...

Maybe you should check out where CALPERS invests internationally...

Chocaholic · 08-13-2007, 06:42 PM

Spend it wisely on drugs and whores. Just be careful not to waste the rest.

'89cab · '89cab's Garage

no disrespect to many of the previous posters, but develop a long range plan and diversify. google coffee house portfolio or Paul Farrell's articles on lazy portfolios. simple long term investment solutions.

I've followed Paul Merriman's Ultimate Buy-and-Hold Portfolio

http://www.fundadvice.com/articles/buy-hold/the-ultimate-buy-and-hold-strategy.html

and done very well in difficult financial times. The time I invested in researching and developing a plan returned ten times the pay-back on any other way I spent my time.

Do it now and reap the rewards for decades

kstar · 08-13-2007, 08:34 PM

This is one of the best "fund" advisor groups in the business, IMHO:

http://www.dfaus.com

FAQ: http://www.dfaus.com/library/faqs/

Philosophy: http://www.dfaus.com/philosophy/

I have no affiliation with DFA other than having historically written and produced a website for an advisor that offers DFA portfolios of funds to retail investors.

FWIW.

Best,

Kurt

Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.
Paul Samuelson

KFC911 · 08-14-2007, 05:11 AM

Quote:

Originally Posted by einreb

For me at 36 with a decent bit socked away already, I lean towards paying mine down rather than adding to additional taxable investments. I supect that I won't 'come out ahead', but I feel better about it....

You're last six words say it all. There is no doubt that paying off one's primary mortgage doesn't maximize leverage, but leverage comes with a price imo. I've seen too many folks "leveraged to the max", who suddenly lose their nice incomes (corporate mergers, outsourcing, etc.) and then are forced into panic mode in order to keep the merry-go-round in motion. When I was a bit younger than you, I decided that in a worse case scenario, if/when "my time came", I'd be prepared. I do not regret that decision at all, but everyone's situation is different.