I’ll preface this with the disclaimer I may be missing something obvious but considering these assumptions:
– a person has a mortgage (at say 4.5% today) and they choose to pay that off monthly (not interest only)
– the opportunity cost of this investment would be a conservative 6%/year in ETFs or REITs (of course this is tentative and an average over the long run)
(See for return references: https://www.fool.com/research/reits-vs-stocks/)
Why would a person choose to pay down their mortgage rather than invest in the markets? The pros of greater liquidity in the markets and greater diversification in REITs seem to make it the preferable choice?
For context, I am a 24M considering the best route to financial independence for myself and future family.
Thanks in advance.
In: Economics
Personal finance is just that, personal. There are a lot of things on paper that makes sense that we as people avoid. One example is merging, if a lane is closed and you have to merge it is best to wait to last second to merge but the irrational side of us hate seeing people do it. Paying off your mortgage will make you feel much re secure even though you’d have more money invested that you can withdraw and pay the house off and taxes on capital gains if needed but we are an irrational race.
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