I recently wrote a post asking you to think about how much you value a fixed rate of return. If you missed it, check it out here: How much is a fixed rate of return worth to you? I came across a post today via a twitter share from the CFA institute, which (it seems) was actually written back in 2012 :Rethinking the Equity Risk Premium at 3.25% I reached out to the author via twitter to see what he thought of my idea to pay down fixed return products instead, and he offered some good advice.
@Saverocity @MichaelKitces @CFAinstitute That is the advice I have given friends, actually.That, and invest in your education – skill update
— Jason Apollo Voss, CFA (@deceptruth) September 10, 2015
So.. there you have it folks. 3.25% over the risk free rate of return is what the experts felt could be achieved… I hope it makes you think hard about how much a fixed rate of return is worth. And like Jason mentions, let’s not forget the value of investing in your education.
I’d argue that the whole notion of taking on more risk for more rewards is fatally flawed.
You should start qualifying your advice. I think you mean to say “IF your mortgage interest rate is over 3.25% THEN you should pay it down.” You haven’t been considering mortgages with rates at or below 3.25%, and there are plenty out there.
Yeah I thought that was obvious from my original post, but good to mention it.
How about 2.875%? Where is the “cutoff”?
You have to decide.