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
It’s a perfectly valid strategy to only pay the interest on a mortgage and instead invest the equivalent equity payments elsewhere. The last 30 years have been a very stable period of peace and prosperity with fairly dependable growth. 2008 was a blip as was COVID and baring the Ukraine and Middle east conflicts expanding there’s good reason to believe the next 30 years will be generally prosperous too. But it is possible there will be disasters that tank the markets and owning your home is real peace of mind if the markets falter. If you’ve never had the wolves at the door it might be hard to appreciate that though.
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