patrick.net

So with regards to investments and mutual funds in particular, I second Patrick's advice. Compare the performance of indexed funds to equity funds that you may own, or are thinking of buying. If the equity funds do not outperform the indexed equity funds, you would be losing money to buy the equity funds due to the higher management fees.

alpo says

what should I do with $200K

One really good hooker, 200 decent hookers, or 100,000 of the hookers that CIC visits.

tatupu70 says

Better to take mortgage.

So, regardless of whether house rises or falls, it pays to take the mortgage if you know you can make 10% on your investment, like I said.

The benefit of getting a home with a mortgage is the tax benefits and high ROI you get with the leverage. Otherwise, investing in the stock market is the clear winner over time.

Dan8267 says

alpo says

what should I do with $200K

One really good hooker,

That's a wife. Very very expensive if you dump her.

Pay off the house. Drive the car until the wheels fall off.

My ride: 2001 Honda Civic HX with 201K miles. I figure it's good for at least another 200K miles.

Call it Crazy says

So, was my analysis wrong after running the numbers??

Of course it was. Because, like I said--it makes no difference if the house goes up in value or down in value. It only matters whether your investment return is greater than the mortgage rate. Which is what I said and you, for some reason, disagreed with.

Here is another way of looking at it. I don't know how many years are left on the mortgage, but let's assume 9 (a WAG, i.e., a 30 year that is 70% paid off.). If you paid off your mortgage with cash that was sitting in a bank account, earning just about zippo, and let's say your mortgage rate was 4%, you'd have a risk free, stable return of 4% over the nine year period. That is much better than what you would get in a risk free 10 year Treasury. So a sure 4% risk-free return, that's not bad. What other folks are pointing out is the opportunity cost. You are getting a 4% return versus a higher return. But if anybody can steer me in the direction of a risk-free 10% return investment, I'm there.

Blurtman says

But if anybody can steer me in the direction of a risk-free 10% return investment, I'm there.

Not even in Mars.

alpo says

I have around 400K of total savings (besides 401k) and a house that is 70% paid off. I am trying to figure out if i should spend $200K of my savings:

1. leave it in savings and continue to live poor now and driving my 10 year old honda civic with lot of body damage inflicted by other people.

2. buy 2015 BMW X5 for $60K + remodel home for $100K and put the rest ($40K) in retirement account?

3. live poor and continue driving beat up honda civic, but use $200K as downpayment for a second home in hawaii - my long term goal is to own two homes fully paid off - live in one and rent out the other for spending money.

4. something else...

any ideas?

I don't believe this is a real post. Anyone capable of putting 400k (other than inheriting it recently) in the bank is smart enough to get a decent return on it not let it sit around in savings or cd's.

I disagree with paying off the house. Is it 70% of the principle or 70% of the payments? Either way mortgages are heavily front end loaded. You've paid most of the interest already. Getting to 70% either way means most of the payment is principal with the principal portion increasing every month. You certainly won't be saving 4% or anything close to that at this point.

put aside $12k to max your Clash of Clans account.

best investment anyone could ever make.

bob2356 says

Either way mortgages are heavily front end loaded

Do you know what that means? It means that when the mortgage principal balance is 300K, you pay the interest on 300K. When the balance is 100K, you pay the interest on 100K. Front loaded is a stupid term. You still pay the same interest, it's just over time you've reduced your principal so more of your payment goes to reducing principal even more.

life is short. make sure you enjoy at least some of it.

Yeah. Hopefully I will figure out how much of life I can or should enjoy before I go old and frail.

Strategist says

Alpo states that his LTV is 30%. The odds are he does not get much of a tax write off from the mortgage interest as the standard deduction on taxes is $12,000 anyway.
If that is the case, that 4% return he gave himself is as good as tax free.

Mortgage interest tax break was good initially, but now it is pretty much gone. Plus we regularly hit AMT even with the mortgage interest, state, and property tax deduction, so I am not sure how much of a tax break I am actually getting. I am pretty much phased out of all the common deductions (like IRA deduction, etc).

Ceffer says

You pay off your primary residence on basic prudence. Don't use your home as leverage for a gambling addiction, pay it off and know you have the security of owning a home no matter what else happens.

We bought the house in 2009 after the financial crash. It was originally listed at 1.35M and we bid it down into short sale as the financial crisis unfolded. Waited for several months for short sale to close, still no other buyer and we finally got it for $1M. Since then we have paid off 700K (including 200K downpayment). Just refinanced the remaining 300K into a 3.25% 15 year mortgage. Monthly mortgage is now 2200, well below its rental price. But no where to go if we rent the house. A 2bed 2bath apartment here in silicon valley rents for at least 2800 if not more. Maybe I should use the $600 per month that I am saving over a 2bed 2bath apartment to finance the BMW :-)

Another way I figure it is that is that I will have to pay around $80K interest over 15 years on my current mortgage. If I can cut that into half, it means I get 40K of free money towards buying a BMW X5 (the other 20K I can manage). Otherwise all my other investments will have to make around $120K to offset the mortgage interest and pay 40K towards a BMW X5. Thats a bit too complicated to make sense for me, so paying down mortgage is easier.

A friend lost $80K of his wife's savings in stock market a couple of years back and obviously the wife is pissed off. I reminded myself not to do stocks. Better of paying down mortgage by 80K. But, yes, I am thinking about gradually putting some money in index funds.

tatupu70 says

He obviously makes pretty good money and may have an expensive house.

Wife and I both have decent jobs in tech sector. Here in Silicon Valley that pretty much means 350K a year with some experience. My wife grew up middle class and I grew up lower middle class plus had to pretty much fend for myself in college. Money is good, but I don't feel rich. Wife splurges every once in a while, but I am still not used to either having money or spending money.

Beyond that there is job uncertainty. My wife is getting increasingly insecure about her job and her ability to find another good job. I have been laid of three times and last time I was out of job for around five months. So job uncertainty has to factor into any financial decisions we make. But I am starting to get to a point where I feel we have some options with money - sort of at an inflection point where if things go as they have been going, we will start building some wealth. The house is expensive $1M cost and apprised at around $1.5M during last refinancing, but its no palace. Just a simple 3bed 2bath rancher on around 7000 sqft lot. Most of our money over last few years has been going into paying off the house.

Other than that, next time there is a major bust in either stock or real-estate market (and definitely there will be one sooner or later), I am definitely going in :-)

You seem stuck on the idea of that car. My experience with expensive cars was it felt interesting and prestigious for about a month or so, then I was just the same asshole in an expensive car and neither me or anybody else really cared anymore, the car was just a car.

Like Rin said, if you want the "car experience", go rent a fancy car for a week or two once in a while and keep your old standard car for regular use.

You'll also be able to try different cars for the day when the money really doesn't matter.

Ceffer says

You seem stuck on the idea of that car. My experience with expensive cars was it felt interesting and prestigious for about a month or so, then I was just the same asshole in an expensive car and neither me or anybody else really cared anymore, the car was just a car.

He's not talking about getting an Aston Martin...

Bigsby says

He's not talking about getting an Aston Martin...

Ceffer says

Like Rin said, if you want the "car experience", go rent a fancy car for a week or two once in a while and keep your old standard car for regular use.

Ppl, a car serves one purpose, getting from point A to point B. And that's about it. Everything else is a vanity thing, the Toyota Corolla achieves the same goal as a Lexus, minus bragging rights.

Thus, I spend my cash on international esc*rts, because that's a real experience of feeling some t*ts and *ss without the lie of a so-called relationship.

Rin says

Ppl, a car serves one purpose, getting from point A to point B. And that's about it. Everything else is a vanity thing, the Toyota Corolla achieves the same goal as a Lexus, minus bragging rights.

Thus, I spend my cash on international esc*rts, because that's a real experience of feeling some t*ts and *ss without the lie of a so-called relationship.

Geez. Not everyone values the same things. The guy seems to be doing quite well and I'm sure he's worked pretty damn hard to get where he is. If he wants to get a BMW, then he should get a BMW.

And you're wrong--I'm pretty sure the comfort level in a luxury car is not the same as the comfort level in a Corolla. For someone who drives a lot, that isn't valueless.

Rin says

Ppl, a car serves one purpose, getting from point A to point B. And that's about it. Everything else is a vanity thing, the Toyota Corolla achieves the same goal as a Lexus, minus bragging rights.

Hilarious given that you seem to spend an inordinate amount of time on here banging on about the fact you fuck prostitutes. Congratulations on that remarkable achievement by the way.

What should I do with 200k?

Give it to me???

Bigsby says

Hilarious given that you seem to spend an inordinate amount of time on here banging on about the fact you fuck prostitutes

seems analogous in a way. he's not worried about the status of the women he fucks.

seems analogous in a way. he's not worried about the status of the women he fucks.

Except he seems to think his VD ridden, 1000+ partner whores are far superior. Good job it's just his rather florid imagination at work.

Bigsby says

Hilarious given that you seem to spend an inordinate amount of time on here banging on about the fact you fuck prostitutes. Congratulations on that remarkable achievement by the way.

At least I'm willing to admit that dating/relationships in America are a bunch of lies and half-truths and that many, if not most ppl in them, are actually miserable.

And yes, it's not worth spending money on luxury cars. That's called, Keeping Up With The Jones.

Rin says

At least I'm willing to admit that dating/relationships in America are a bunch of lies and half-truths and that many, if not most ppl in them, are actually miserable.

Really? Personally, I think you are just bullshitting and actually have little to no experience of the opposite sex. You just need to read some of your earlier posts on here to see what I mean...

Bigsby says

little to no experience of the opposite sex

It's been 4 years since my last relationship, you know, the whack job Canadian, so yes, it's all in the rear view mirror.

But the facts remain, relationships are a waste of time. And yes, I've heard your BS before, I'm in my mid-30s, not 15, And ask yourself how many teenagers know so much about fields like chemical engineering and STEM, management consulting, etc, w/o some experience in life.

Ask Strategist, if he's so happy in marriage.

lostand confused says

What should I do with 200k?

Give it to me???

Agreed. And to me. Getting shafted by Obummer's and CA's fucked up class war tax system this year. At this point any right-wing bigot nutter is better than this asshole and the Democratic party of cultural marxists abandoning a once flourishing meritocracy by spending other people's money. Have fun with my hard-earned money, assholes. Book it! ;)

Bigsby says

Rin says

Ppl, a car serves one purpose, getting from point A to point B. And that's about it. Everything else is a vanity thing, the Toyota Corolla achieves the same goal as a Lexus, minus bragging rights.

Hilarious given that you seem to spend an inordinate amount of time on here banging on about the fact you fuck prostitutes. Congratulations on that remarkable achievement by the way.

And on the real issue, as oppose to lifestyles, how does a Corolla not achieve the same goals as a Lexus, in terms of transportation?

Rin says

But the facts remain, relationships are a waste of time. And yes, I've heard your BS before, I'm in my mid-30s, not 15, And ask yourself how many teenagers know so much about fields like chemical engineering and STEM, management consulting, etc, w/o some experience in life.

Ask Strategist, if he's so happy in marriage.

I'm not sure what working in STEM has got to do with countering the fact you post about women like you're a feverish 15 year-old... unless you are the stereotypical nerd incapable of getting any.

Rin says

And on the real issue, as oppose to lifestyles, how does a Corolla not achieve the same goals as a Lexus, in terms of transportation?

I don't get your point. A bed in a room with a roof gives you somewhere to sleep, but that doesn't mean the experience of sleeping at Motel 6 is the same as a night at an Aman hotel.

Bigsby says

I'm not sure what working in STEM has got to do with countering the fact you post about women like you're a feverish 15 year-old... unless you are the stereotypical nerd incapable of getting any.

Of course I'm a nerd, that's fairly obvious. However, after the break up with the Canadian, I'd stopped caring about relationships altogether.

Today, women know that I'm in financial services and show interest. I simply don't care anymore. That's why I'd been advocating hoes over regular women because at least hoes are honest about what they want. Regular women are looking for a beta male, esp in their early 30s, to start a household.

My hope is that someday, your future spouse takes you to the cleaners and ruins your life. Then, you'll remember this conversation in the past.

Bigsby says

I don't get your point. A bed in a room with a roof gives you somewhere to sleep, but that doesn't mean the experience of sleeping at Motel 6 is the same as a night at an Aman hotel.

How much time do you spend in your car versus your bed? 1 hour vs 8 hours per day. Plus, what's so bad about a Corolla? Do you really need all the furnishings of a Lexus for a mere 1 hour of daily transportation? Are you that concerned about status?

Rin says

How much time do you spend in your car versus your bed? 1 hour vs 8 hours per day. Plus, what's so bad about a Corolla? Do you really need all the furnishings of a Lexus for a mere 1 hour of daily transportation? Are you that concerned about status?

WTF? It's a hotel. You're asleep all that time, so...

And there's nothing wrong with a Corolla, but what's wrong with buying a nicer car? Didn't he mention a BMW X5? $60,000 or so. That's not exactly making that much of a statement.

Bigsby says

didn't he mention a BMW X5? $60,000 or so. That's not exactly making that much of a statement.

An S&P500 tracker fixed annuity, with a $60K initial investment, using a 2% management fee structure, and since the downturn years are simply a 0% for that year, can grow to $110K, from 2001 to 2011. There are calculators online for this, if you don't believe me. That's a better way to use one's savings than in a show off vehicle.

Rin says

An S&P500 tracker fixed annuity, with a $60K initial investment, using a 2% management fee structure, and since the downturn years are simply a 0% for that year, can grow to $110K, from 2001 to 2011. There are calculators online for this, if you don't believe me. That's a better way to use one's savings than in a show off vehicle.

Oh, FFS. Yes, yes and if you'd bought Apple shares in 1997, blah-blah-blah. It sounds like he's saving more than enough for when he's old and grey and probably unable to do little more than droll as he's spoon fed at the nursing home. Maybe, just maybe, it's not such a bad thing to spend some of his own money on something he might quite like and at an age when he can enjoy it the most. After all, given all your claims about fucking expensive hookers in Canada, how much are you pissing away to get VD from someone who's shagged more people than your average Rolling Stone?

Bigsby says

if you'd bought Apple shares in 1997

Which shows that you don't know what you're talking about.

All cap gain tech stocks are high risk volatile equities. S&P500 tracker fixed annuities are insurance products. Do you understand the difference?

If you want to play equities, without an insurance aspect, read my post on dividends ...

"If you want to be a passive investor, but want some assurance of not completely losing your shirt, stick to the usual dividend suspects like tobacco, utilities, alcohol, food stuffs, and automatically re-invest those dividends (DRIPs). That pile will grow over time. And what happens during years like '08, is that since the overall market goes down, the actual dividend percentage spikes up. I've even seen up to 12-20% dividends at the bottom, because the prices were so hammered but those industries earn enough to not have to cut the same payout as prior quarters. Basically during those troughs, you'll be buying up 2-3x the number of shares at the bottom. When the market re-coops, you're now own much more of those businesses than before. Nobody goes broke, betting on ppl's smoking addiction."

Sorry, but I give solid advice, not BS on buying luxury cars.

Rin says

Which shows that you don't know what you're talking about.

All cap gain tech stocks are high risk volatile equities. S&P500 tracker fixed annuities are insurance products. Do you understand the difference?

Don't be stupid. I was making a flippant comment about one stock pick. What difference does investing in the stock market over X period of time make to the decision of someone who claims to have paid off $500,000 on his house in 5 years and to have $400,00 in cash lying around? Clearly he needs the advice of an 'expert' on Patnet. This isn't a discussion of the best approach to his retirement plans, merely a comment about WTF is wrong with such a person buying a reasonably nice, somewhat above mid-range car. Clearly he can afford it. But oh, no, according to someone who claims to piss away his money on expensive Canadian hookers, it's a waste of money. Go figure.

Bigsby says

who claims to piss away his money on expensive Canadian hookers

I earn a lot more than I piss away (since I'm happy with a mere Accord) and since I don't have a leech Mrs in my life, my eggsnest is growing, remember the dividends. Many of my married friends have financial issues, not me.

Bigsby says

What difference does investing in the stock market over X period of time

You obviously don't know what an annuity product is. It's sold by an insurance company, so that when the market goes down (yes, during years like 2000-02, 2007-09, etc), your principal is preserved. Yes, they have a management fee during the flush years, so you don't get the max out of a bull run, but at least your capital is preserved. Does this make sense to you?

Rin says

I earn a lot more than I piss away (since I'm happy with a mere Camry) and since I don't have a leech Mrs in my life, my eggsnest is growing, remember the dividends. Many of my married friends have financial issues, not me.

And he and his wife don't? His wife has a high paying salary. Clearly she's a real leech compared to your claimed hookers.

Rin says

You obviously don't know what an annuity product is. It's sold by an insurance company, so that when the market goes down (yes, during years like 2000-02, 2007-09, etc), your principal is preserved. Yes, they have a management fee during the flush years, so you don't get the max out of a bull run, but at least your capital is preserved. Does this make sense to you?

Good grief. Once again, what has all that got to do with him buying a car he wants?

FYI, Camry is my next car. I currently drive an Accord.

Bigsby says

Good grief. Once again, what has all that got to do with him buying a car he wants?

He can do whatever he wants, who's stopping him. On the other hand, there's no UTILITARIAN purpose in a $60K vehicle when a $20K vehicle does exactly the same thing minus the status symbol.

And yes, someday ... when he's downsized, rightsized or facing age discrimination (about to get kicked out of his field), that annuity which grew from $40K to $70K during the decade (which is the full price for two 2 yr old Corollas), may come in handy. That's called saving for a rainy day.

Bigsby says

real leech compared to your claimed hookers.

I expense the hotel rooms and then, those gals are out of my life after a short while, no strings period. Yes, it's economical, versus playing "Keeping Up With the Jones", buying the Mrs jewelery, taking her out all of the time to nice restaurants, moving to the *right* school district, etc.

Rin says

FYI, Camry is my next car. I currently drive an Accord.

That wasn't information that I had any interest in knowing strangely enough.

Rin says

On the other hand, there's no UTILITARIAN purpose in a $60K vehicle when a $20K vehicle does exactly the same thing minus the status symbol.

Remarkable. The capital letters make all the difference. You could say the exact same thing for just about anything people spend their money on. You know rather like how you could get yourself a steady girlfriend rather than paying for a hooker in a foreign country.... You never did say how much those trips cost...
And this isn't an either or issue, is it? A bloke who paid off $500k of his mortgage in 5 years and saved $400k in the process isn't exactly living hand to mouth. And last I checked, buying a mid-range BMW isn't really that much of a status symbol. You should know - don't you claim to be working in investment banking or some such? Would that count as a status symbol amongst your colleagues?

Rin says

I expense the hotel rooms and then, those gals are out of my life after a short while, no strings period. Yes, it's economical, versus playing "Keeping Up With the Jones", buying the Mrs jewelery, taking her out all of the time to nice restaurants, moving to the *right* school district, etc.

Or, you know, you could find yourself an educated and interesting woman to go out with who makes a similar salary to you...

And you still seem reticent to say how much you spend on these hookers...