Paying
Drifting
Joined: May 2018
Posts: 1,478
Likes: 985
From: Houston Texas
These posts kill me. No discussion of a person’s overall leverage (house, cars, margin accounts, credit cards)—total debt to total assets. The other thing that is not mentioned is that car loans are not tax deductible. There is in inverted yield curve right now, which generally does not portent for medium term equity gains. Also there are very compressed spreads in lower investment grade bonds (BBB-/Baa3) which is also a late cycle indicator.
Last edited by Michael T*; Oct 25, 2019 at 09:43 PM.
Le Mans Master
Joined: Aug 2004
Posts: 6,877
Likes: 531
These posts kill me. No discussion of a person’s overall leverage (house, cars, margin accounts, credit cards)—total debt to total assets. The other thing that is not mentioned is that car loans are not tax deductible. There is in inverted yield curve right now, which generally does not portent for medium term equity gains. Also there are very compressed spreads in lower investment grade bonds (BBB-/Baa3) which is also a late cycle indicator.
Le Mans Master
Joined: Jul 2010
Posts: 6,592
Likes: 2,649
From: Lancaster, PA
I keep seeing 'depreciating asset' description making it a reason to finance vs. paying cash. Can someone explain it why it makes a difference if it is a depreciating or appreciating asset that you finance vs. pay cash for? I mean you're loosing money on the car in either way. It doesn't matter when you're paying for it. I'm not looking for an explanation of borrowing at 2% and earning 7% on investment, strictly why it matters that it is a depreciating asset.
Assumption: no current debt, would be able to pay cash
Assumption: no current debt, would be able to pay cash
Sorry dude, you can spin it anyway you want. First off I never said 7%, second I said its one of mine, you want better do your own research. third, its still a much smarter way to go then to pay cash. So, again, spin all you want, the current return 6.78%.........all vary, higher and lower, but, again, spin all you want.........In four years I will have 100+ STILL invested.......those who pay cash will have a depreciated asset....maybe $45k
Also, you paid monthly payments for 4 years.
Most people forget about tax liabilities on earnings and also the fact that loans are paid back with money after inflation (from future earnings). So all these calculations should include taxes and the rate of inflation.
You guys should really try options, that's where the real money is made! Why have 7% return when you could make 70%?
Last edited by range96; Oct 25, 2019 at 10:07 PM.
Race Director
Joined: Apr 2014
Posts: 13,004
Likes: 773
From: "Shitcago"
I'll be Dancing in the streets.
Gonna work (except nights, weekends, all Fed Holidays, spring, summer and fall) for One Year.
Make a $100,000.00 then buy my C8, 1LT, Z51.
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Le Mans Master
Joined: Aug 2004
Posts: 6,877
Likes: 531
My background is scientific: BS EE, Johns Hopkins. I do enjoy reading financial books however, and I enjoy reading John Bogle and learned quite a bit from him. I can still recall some of his insights:
Stock-market risk:"If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks."
Diversification: "Don't look for the needle in the haystack. Just buy the haystack."
Trusting brokers: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
This one takes some thought and I suppose that there are different interpretations. Mine would be that a securities salesperson makes his money by ignoring a product flaws and not suggesting alternatives that are better for his client but less profitable for the salesperson.
BTW I just finished reading " Firefighting - The Financial Crisis and its Lessons. It was a collaborative effort by Bernanke, Geithner, and Paulson. I had no idea how close the US came to a full fledged depression until I read the book. It's an audio book, so you can listen to it during your commutes.
Stock-market risk:"If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks."
Diversification: "Don't look for the needle in the haystack. Just buy the haystack."
Trusting brokers: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
This one takes some thought and I suppose that there are different interpretations. Mine would be that a securities salesperson makes his money by ignoring a product flaws and not suggesting alternatives that are better for his client but less profitable for the salesperson.
BTW I just finished reading " Firefighting - The Financial Crisis and its Lessons. It was a collaborative effort by Bernanke, Geithner, and Paulson. I had no idea how close the US came to a full fledged depression until I read the book. It's an audio book, so you can listen to it during your commutes.
Le Mans Master
Joined: Jul 2010
Posts: 6,592
Likes: 2,649
From: Lancaster, PA
Burning Brakes
Joined: Aug 2019
Posts: 1,088
Likes: 236
Would be no different, 5-year comparison vs 30-year comparison. Sounds like you just don't like seeing what appears to be a large interest payment.
Here's another try: $300,000 mortgage
Let's assume $300,000 mortgage, no down payment, 4.5% rate for 30 years. Payments are $1,520.06. After 30 years the total interest paid would be $247,220.13. With that same $300K in a 7% annual return investment, your $300K will be $2,283,676.513 at the end of 30 years, a gain of $1,983,676.51 ... so $1,983,676.51 minus the $247,220.13 = $1,736,456.38
You'd be $1.7M better off leaving your $300K in the 7% investment and borrowing $300K at 4.5% for the house.
Here's another try: $300,000 mortgage
Let's assume $300,000 mortgage, no down payment, 4.5% rate for 30 years. Payments are $1,520.06. After 30 years the total interest paid would be $247,220.13. With that same $300K in a 7% annual return investment, your $300K will be $2,283,676.513 at the end of 30 years, a gain of $1,983,676.51 ... so $1,983,676.51 minus the $247,220.13 = $1,736,456.38
You'd be $1.7M better off leaving your $300K in the 7% investment and borrowing $300K at 4.5% for the house.
Safety Car
Joined: Oct 2008
Posts: 4,912
Likes: 266
From: Charleston SC
Race Director
Joined: Aug 2019
Posts: 12,351
Likes: 14,185
From: Central Illinois
I've got a bunch of cash I've love to invest right now and enjoy a 7% return for up to 30 years, also have a home I inherited that should soon sell for close to half a mil. Please give me a few leads on where I can get 7%, my portfolios in Vanguard, Fidelity, and Ameritrade are laggers compared to that right now.
Burning Brakes
Joined: Aug 2019
Posts: 1,088
Likes: 236
In case you missed it, in post #77 I wrote: Agreed, no guaranteed returns like that ... none that I know of anyway, unless you're a politician 
... but let me say that my employer terminated our company's IRA plan, distributed it to us employees, and I rolled mine over to a set of Vanguard index funds on 10/22/2012. My account value is up 87.61% as of yesterday's market close. That's 6.95 years which is a compound annual growth rate of 9.47%. Yes, I'm aware that the market has done very well over that period, but I'm comfortable with the stated 6.78% or even 7% average long-term stock market returns. It's probably actually somewhat higher than that ... but who knows what tomorrow will bring 
9.47% per year for almost 7 years. That's great. Do I guarantee it will continue, or even think it will, no, no I do not. Not at all. I had money in the market when it tanked in '08 including all the way down to the Dow's March 9th 2009 bottom at 6,547, so I'm well aware of had far it can fall and how people panic. But if the market continue going up, good. And if it falls, I keep cash on hand to put more in.
I invest in a set of Vanguard index funds, some Domestic, some International, some Emerging Markets, some Small Cap, some Large Cap, and some Short Term Bond. I have specific set allocations for each one. When I have more cash to put in, I put it into the funds that are lagging my targets ... that causes me to 'buy low".
... but let me say that my employer terminated our company's IRA plan, distributed it to us employees, and I rolled mine over to a set of Vanguard index funds on 10/22/2012. My account value is up 87.61% as of yesterday's market close. That's 6.95 years which is a compound annual growth rate of 9.47%. Yes, I'm aware that the market has done very well over that period, but I'm comfortable with the stated 6.78% or even 7% average long-term stock market returns. It's probably actually somewhat higher than that ... but who knows what tomorrow will bring 9.47% per year for almost 7 years. That's great. Do I guarantee it will continue, or even think it will, no, no I do not. Not at all. I had money in the market when it tanked in '08 including all the way down to the Dow's March 9th 2009 bottom at 6,547, so I'm well aware of had far it can fall and how people panic. But if the market continue going up, good. And if it falls, I keep cash on hand to put more in.
I invest in a set of Vanguard index funds, some Domestic, some International, some Emerging Markets, some Small Cap, some Large Cap, and some Short Term Bond. I have specific set allocations for each one. When I have more cash to put in, I put it into the funds that are lagging my targets ... that causes me to 'buy low".
Burning Brakes
Joined: Aug 2019
Posts: 1,088
Likes: 236
Race Director
Joined: Aug 2019
Posts: 12,351
Likes: 14,185
From: Central Illinois