QUESTION FOR SMART MONEY TYPE PEOPLE

[AzCat]

if something were to happen as you suggest,  it'd be better to have that money in a more liquid state and not tied up in a 30 yr note and in a home that's only worth what someone else will pay for it.

the cd/money market is really the way to go. 

Yep.  I couldn't agree more with Jeffy about the virtues of a debt-free lifestyle but the first order of business along those lines should be funding an adequate emergency account. 

[jeffy]

if something were to happen as you suggest,  it'd be better to have that money in a more liquid state and not tied up in a 30 yr note and in a home that's only worth what someone else will pay for it.

the cd/money market is really the way to go. 

Yep.  I couldn't agree more with Jeffy about the virtues of a debt-free lifestyle but the first order of business along those lines should be funding an adequate emergency account. 

I kinda hoped that went without saying.  Most on here should know that I've been a Dave Ramseyite for 3 years now.  By that, it implies that your 6 month emergency fund is in place before extra is ever thrown to the mortgage.  Emergency funds should be in place no matter what - whether you pay extra on the mortgage or whether you rent.  It's got to be the single most important part of any financial plan.

[jeffy]

if something were to happen as you suggest,  it'd be better to have that money in a more liquid state and not tied up in a 30 yr note and in a home that's only worth what someone else will pay for it.

the cd/money market is really the way to go. 

As AzCat mentioned, having an emergency fund precludes any extra payment on mortgage.  I'd stick with a money market.  CDs are hardly liquid, unless they have already matured.  Even then, they can't be cashed out unless the bank is open.  Money market accounts are available whenever the emergency arises.

[Legore]

pay the minimum on your mortgage and take the extra you would have put towards your mortage and invest it in ETF's.  They'll give you market returns without the risk of indivisual stocks and without the high fees of mutual funds.  Also you won't pay taxes on the growth of ETF's (unless you sell) while you get to deduct the mortgage interest.  Paying your mortgage early is only the best option if your other choice with the money is to waste it or bury it in your back yard. 

I know Ramsey preaches to do it but he is preaching to people that are bad with their money so it probably is the best option for them.  Me I'd rather be liquid then having all my money tied up in my home.  Don't mean to brag but I have enough money to pay off my mortgage now but there is no good reason to do it as long as I have the income to make the minimum payments each month.  Especially with the type of inflation I expect to see I'd rather wait and pay it off with deflated dollars.  Debtors win with inflation.

[AzCat]

pay the minimum on your mortgage and take the extra you would have put towards your mortage and invest it in ETF's. 

I hope you're not suggesting that anyone put their rainy day fund into equity ETFs. 

[Saulbadguy]

if something were to happen as you suggest,  it'd be better to have that money in a more liquid state and not tied up in a 30 yr note and in a home that's only worth what someone else will pay for it.

the cd/money market is really the way to go. 

Yep.  I couldn't agree more with Jeffy about the virtues of a debt-free lifestyle but the first order of business along those lines should be funding an adequate emergency account. 

I kinda hoped that went without saying.  Most on here should know that I've been a Dave Ramseyite for 3 years now.  By that, it implies that your 6 month emergency fund is in place before extra is ever thrown to the mortgage.  Emergency funds should be in place no matter what - whether you pay extra on the mortgage or whether you rent.  It's got to be the single most important part of any financial plan.

anti-semite.

[pissclams]

if something were to happen as you suggest,  it'd be better to have that money in a more liquid state and not tied up in a 30 yr note and in a home that's only worth what someone else will pay for it.

the cd/money market is really the way to go. 

Yep.  I couldn't agree more with Jeffy about the virtues of a debt-free lifestyle but the first order of business along those lines should be funding an adequate emergency account. 

I kinda hoped that went without saying.  Most on here should know that I've been a Dave Ramseyite for 3 years now.  By that, it implies that your 6 month emergency fund is in place before extra is ever thrown to the mortgage.  Emergency funds should be in place no matter what - whether you pay extra on the mortgage or whether you rent.  It's got to be the single most important part of any financial plan.

anti-semite.

anti-dentite.

[Legore]

pay the minimum on your mortgage and take the extra you would have put towards your mortage and invest it in ETF's. 

I hope you're not suggesting that anyone put their rainy day fund into equity ETFs. 

no just like the poster above I'm assuming you already have your rainy day fund established before you worry about what to do with any excess money.  I agree that everyone's first priority should be building up approx 6 months living expenses in some type of FDIC insured cash account.  Until you get that built up you shouldn't invest or pay down your mortgage either one.     

[Kat Kid]

meh, 6 month rainy day fund is hilariously overrated.

As long as you are young with no kids and decent earning potential much better to max the IRAs and shove money in the market now.

Legore what is the major difference between ETFs and Vanguard Index funds.  If I don't want active management, have under $10,000 (excluding IRA/rainy day) in investments and want the lowest fees possible until I can actually get a serious portfolio that can be more diversified, aren't I better just keeping the 500 Index?

Let me know.

[Kat Kid]

Make bigger/extra mortgage payments?

that's solidly bad advice.

Can save a ton of money by paying more money on your mortgage each month.  Ton.

no chit?  never heard that before.   

he asked for investment advice.  throwing money at a house in this market isn't that.

Isn't saving a ton of money on interest payments not an investment of sorts? 

Depends.  Suppose you lock in a fixed 5% mortgage (no idea how low you can get these days but it seems like sub-5s are pretty available).  Right now chipping a few extra bucks might seem like a good idea but suppose you could stroll down to the bank and put that money in a short to mid term CD at 6%, would it still be a good idea to put that extra money towards your house payment knowing that you'd be taking a net 1% less than you could have gotten?  Depending on whether or not you're self-employed & whether or not your mortgage interest deduction is knocking down your self-employment tax that 1% advantage could be magnified. 

Are you an idiot that has no idea what the CD/Bond market is right now or am I an idiot that has no idea what the CD/Bond market is right now?

I am open to any and all information that would help clarify either way.

[michigancat]

Make bigger/extra mortgage payments?

that's solidly bad advice.

Can save a ton of money by paying more money on your mortgage each month.  Ton.

no chit?  never heard that before.   

he asked for investment advice.  throwing money at a house in this market isn't that.

Isn't saving a ton of money on interest payments not an investment of sorts? 

Depends.  Suppose you lock in a fixed 5% mortgage (no idea how low you can get these days but it seems like sub-5s are pretty available).  Right now chipping a few extra bucks might seem like a good idea but suppose you could stroll down to the bank and put that money in a short to mid term CD at 6%, would it still be a good idea to put that extra money towards your house payment knowing that you'd be taking a net 1% less than you could have gotten?  Depending on whether or not you're self-employed & whether or not your mortgage interest deduction is knocking down your self-employment tax that 1% advantage could be magnified. 

Are you an idiot that has no idea what the CD/Bond market is right now or am I an idiot that has no idea what the CD/Bond market is right now?

I am open to any and all information that would help clarify either way.

azcat appears to be way off.

http://www.bankrate.com/cd.aspx

[AzCat]

Make bigger/extra mortgage payments?

that's solidly bad advice.

Can save a ton of money by paying more money on your mortgage each month.  Ton.

no chit?  never heard that before.  

he asked for investment advice.  throwing money at a house in this market isn't that.

Isn't saving a ton of money on interest payments not an investment of sorts?  

Depends.  Suppose you lock in a fixed 5% mortgage (no idea how low you can get these days but it seems like sub-5s are pretty available).  Right now chipping a few extra bucks might seem like a good idea but suppose you could stroll down to the bank and put that money in a short to mid term CD at 6%, would it still be a good idea to put that extra money towards your house payment knowing that you'd be taking a net 1% less than you could have gotten?  Depending on whether or not you're self-employed & whether or not your mortgage interest deduction is knocking down your self-employment tax that 1% advantage could be magnified.  

Are you an idiot that has no idea what the CD/Bond market is right now or am I an idiot that has no idea what the CD/Bond market is right now?

I am open to any and all information that would help clarify either way.

azcat appears to be way off.

http://www.bankrate.com/cd.aspx

Emphasis added to assist the reading-comprehension impaired.  

[michigancat]

LOL

[Legore]

meh, 6 month rainy day fund is hilariously overrated.

As long as you are young with no kids and decent earning potential much better to max the IRAs and shove money in the market now.

Legore what is the major difference between ETFs and Vanguard Index funds.  If I don't want active management, have under $10,000 (excluding IRA/rainy day) in investments and want the lowest fees possible until I can actually get a serious portfolio that can be more diversified, aren't I better just keeping the 500 Index?

Let me know.

An ETF is pretty similar to your Vanguard fund. A mutual fund is a actively managed basket of stocks that you pay somebody a fee to manage.  An index mutual fund isn't really actively managed (they just  mirror the index rather then making stock picks) so the fees are going to be lower on those then actively managed funds. 

An ETF is a predetermined group of stocks that are packaged together.  The right to own this group of stocks is then bought and sold on an exchange similar to a stock. 

Things I like about ETF's over mutual funds-
1. lower fees expecially the Vanguard ETF's who have very low fees.  That said your choice of mutual funds Vanguard Index is a good low fee choice as well.
2. You can buy or sell intraday.  When you buy or sell a mutual fund you get the price at the close of market.  With an ETF you get the current market price and you can use limit orders, stop losses and those kinds of things.
3. In a mutual fund the fund manager buys and sells stocks and you will get hit with capital gains on these trades.  You don't really have control over your capital gains.  With an ETF's you only pay taxes when you sell the fund or receive a dividend.  The exception to this is when they change the stocks contained in the ETF but that doesn't happen often.   

I've never been a big mutual fund guy because of the fees and because most managers can't beat the index anyway.  But I think you're fine with your choice of funds and probably wouldn't see much difference between a large cap ETF (I'm in the Vanguard large cap ETF symbol VV) and your Vangurd Index Fund.  Mainly what I like to do is buy EFT's that mirror sectors.  Say I think Oil and Gas stocks are going to go up rather then taking the risk of picking the wrong oil and gas stock I'll buy an oil and gas sector ETF.

[Kat Kid]

meh, 6 month rainy day fund is hilariously overrated.

As long as you are young with no kids and decent earning potential much better to max the IRAs and shove money in the market now.

Legore what is the major difference between ETFs and Vanguard Index funds.  If I don't want active management, have under $10,000 (excluding IRA/rainy day) in investments and want the lowest fees possible until I can actually get a serious portfolio that can be more diversified, aren't I better just keeping the 500 Index?

Let me know.

An ETF is pretty similar to your Vanguard fund. A mutual fund is a actively managed basket of stocks that you pay somebody a fee to manage.  An index mutual fund isn't really actively managed (they just  mirror the index rather then making stock picks) so the fees are going to be lower on those then actively managed funds. 

An ETF is a predetermined group of stocks that are packaged together.  The right to own this group of stocks is then bought and sold on an exchange similar to a stock. 

Things I like about ETF's over mutual funds-
1. lower fees expecially the Vanguard ETF's who have very low fees.  That said your choice of mutual funds Vanguard Index is a good low fee choice as well.
2. You can buy or sell intraday.  When you buy or sell a mutual fund you get the price at the close of market.  With an ETF you get the current market price and you can use limit orders, stop losses and those kinds of things.
3. In a mutual fund the fund manager buys and sells stocks and you will get hit with capital gains on these trades.  You don't really have control over your capital gains.  With an ETF's you only pay taxes when you sell the fund or receive a dividend.  The exception to this is when they change the stocks contained in the ETF but that doesn't happen often.   

I've never been a big mutual fund guy because of the fees and because most managers can't beat the index anyway.  But I think you're fine with your choice of funds and probably wouldn't see much difference between a large cap ETF (I'm in the Vanguard large cap ETF symbol VV) and your Vangurd Index Fund.  Mainly what I like to do is buy EFT's that mirror sectors.  Say I think Oil and Gas stocks are going to go up rather then taking the risk of picking the wrong oil and gas stock I'll buy an oil and gas sector ETF.

Excellent summary.

My guess was that at my level the trade fees and brokerage fees will be a bigger hit than the lower mgt. fees.