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0 pointsgiorgioz4y ago0 comments

Your comment, though sarcastic, underlines some points I thought about myself and I would like to discuss it!

We are both well aware that there is no risk-free investment. Governments bonds that are considered less risky that ETFs usually return 1-2% per year.

The ETF I'm talking about maps a market index covering a big chunk of the US market or several stable international markets. They are still a risk, your house is also an asset and is also a risk. I think if you only have your mortgage as an asset then probably buying some ETFs would help diversify your assets. But if you already have a lot ETFs then maybe would be better to finish up earlier the mortgage...

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arcticbull4y ago

Sorry if I came across that way, I wasn't being sarcastic at all. Series I bonds are essentially risk-free unless you think the US government plans to default within the next 1 year (which is basically the lock-up period). Series I bonds pay a coupon equal to CPI. The current Series I interest rate is 7.11%. It is variable, however, and capped at $10,000 in contributions per year (online). [1]

[1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...

dragonwriter4y ago

> I think if you only have your mortgage as an asset

Your mortgage is a liability, not an asset.

arcticbull4y ago

It really isn't if the interest rate is below inflation. If it's below inflation, the mortgage is yielding real-dollar value. That's an asset in my eyes.

It's a calendar spread. Last year, you were buying 2021 dollars for a fixed rate (2.675% APR in my case), but you different vintage dollars over time. You owe 2022 dollars in 2022, and 2031 dollars in 2031. A 2051 dollar is almost certainly going to be worth significantly less than a 2021 dollar.

So you're buying 1 2021 vintage USD, but at the extreme, you're paying it back with 2.2 2050 dollars. If we expect inflation to be an average of say, 3% over that period, each 2021 vintage USD should be worth at least 2.42 2021 vintage dollars. So in this example, you're earning real dollars over this period.

dragonwriter4y ago

> It really isn't if the coupon rate is below inflation

It's a liability in the amount of the balance. I suppose you could consider the present value of the “income” stream of the difference between inflation and interest over the life of the loan as an asset, but unless it's a very unusual loan, any income stream of that kind is likely to be a transitory effect, and interest is likely to be be a real as well as nominal expense considered over the life of the loan.

arcticbull4y ago

Indeed, you are of course correct! I'm just hoping folks look at mortgages not as a strictly bad thing, but as a tool in their financial arsenal. They can be good! I think most folks are stuck in nominal dollar mode, and it can really help to look at things in real dollar terms.

I think I may have been loose with my words.

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arcticbull4y ago

[1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...

dragonwriter4y ago

> I think if you only have your mortgage as an asset

Your mortgage is a liability, not an asset.

arcticbull4y ago

It really isn't if the interest rate is below inflation. If it's below inflation, the mortgage is yielding real-dollar value. That's an asset in my eyes.

dragonwriter4y ago

> It really isn't if the coupon rate is below inflation

arcticbull4y ago

I think I may have been loose with my words.

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