Not a convincing argument, in my opinion.Here is an extreme example just to demonstrate a point.
I do not think it is wise for the average 70 year old to have a portfolio containing 100% stocks. Does that mean that this 70 year old, who is comfortable at 50:50, should not buy a house using a mortgage?
No, It should not meant that, but following your logic, that is exactly what it means. The choice, based only on the math, is a dumb portfolio allocation or no house.
<< rest snipped >>
This 70-year old should be selling all bonds in that 50:50 portfolio and taking a much smaller and a 30-year mortgage, especially if it means (as in the OP's case) borrowing at 10% to 11% and lending out back at 4% (both in pre-tax terms). Assuming that the emergency fund is adequately funded (and separate from the "portfolio" that is 50:50), the remaining 50% in stocks should still be adequate to meet the mortgage expenses. What is the purpose of this "50% in bonds" in the portfolio, if not for income, and the "income" can still be realized through much-reduced mortgage payment.
Statistics: Posted by lakpr — Mon Sep 02, 2024 8:23 pm — Replies 48 — Views 2919