Sell shares to overpay mortgage?

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Cardano93 said:
It all comes down to risk and reward
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It does indeed.

But here's the thing - tax changes the risk/reward analysis. To the point that I would argue that paying down a mortgage is a better "investment", on a risk-adjusted basis, than investing in equities outside a pension vehicle.

Incidentally, if I won the lottery and somebody told me I was very lucky, I wouldn't regard that as begrudgery - it's just a statement of fact.
 
You’re just showing that you’ve no concept of risk, risk-adjusted returns, or risk/reward.


Take a look at Schroders’ forecasts for the next 10 years; they reckon 4.3% pa from equities.

Even if we look at longer term averages of, say, 7%, as Sarenco rightly highlights tax is the game-changer.

My mortgage is currently at 2.5% so throwing money against that is probably close to a 5% guaranteed return before tax (because I’m servicing it from after-tax income).

Imagine an investment that guaranteed 5%?
 
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Cardano93 said:
Looks like some of the posters here would also begrudge a successful entrepreneur - obviously that success was because they were lucky
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Bono said it well

"In the United States, you look at the guy that lives in the mansion on the hill, and you think, you know, one day, if I work really hard, I could live in that mansion. In Ireland, people look up at the guy in the mansion on the hill and go, one day, I'm going to get that b@stard. It's a different mind-set."
 
Dublinbay12 said:
No seriously, can you pass on the solicitors details?

Sorry for being 'pedantic' and using real life considerations to critique your comments, I'll try to stay in the hypothetical.
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The figure of €200,000 has been thrown around. For a remortgage, you’re probably talking about 0.5% which could be made-up quite easily when making the investment.

It’s absolute pedantry.

Sure investing vs paying down the mortgage will incur stamp duty or the 1% insurance levy.
 

Yes I already made the point of the importance tax plays and have constantly referenced the many factors that need consideration. Glad to see you are coming around to that.

Again I need to stress that I have mandated for a portfolio, yourself and others seem to focus on a rhetoric that you can either only pay down your mortgage or invest, there can't be a balance. My rhetoric is that there is a balanced portfolio approach that considers many factors, but apparently this was too complicated.

I'm not sure why you are still going on about luck, and really not sure why you believe that picking stocks by any other means than value investing is equivalent to random selection. You do understand there are not only other methods of stock picking, but there are also other factors that impact a stock price and not just an equation somebody wrote 75 years ago.
 
Cardano93 said:
I’ve already provided a DETAILED example of compounding comparisons for investment and debt over a 20 year period. Using MODERATE returns based on S&P 500 historical data, investment beats mortgage overpayment CONSIDERABLY.
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With long-term returns of around 7%, tax at a blend of 33% and 52%, and investment costs of, say, 1%, please enlighten me as to how investment beats overpaying an average mortgage rate of circa 3% “considerably”…
 
Cardano93 said:
Using moderate returns based on S&P 500 historical data, investment beats mortgage overpayment considerably.
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And i’ve already shown that had you invested in an index fund that tracks the S&P500 you would not have beaten the weighted averaged Irish mortgage rate over the first 20 years of this century, after taking account all expenses and taxes. So the risk wasn’t rewarded.

I’m afraid we’re going around in circles at this stage…
 

So when considering to switch mortgage rate, I shouldn't factor in the costs associated? That is too pedantic?
 
Dublinbay12 said:
So when considering to switch mortgage rate, I shouldn't factor in the costs associated? That is too pedantic?
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Yes, it’s too pedantic in the context of
this discussion.

It’s also why I deliberately and repeatedly used the term “effectively” to minimise the risk of someone screaming “BUT IT’S NOT EXACTLY THE SAME” and waving his or her arms in the air frantically.

If you can’t see that, we’ll just continue to go round in circles.

It would be like me saying “but there’ll be 0.5-1% stamp duty on investing the money versus 0% on paying off the mortgage”.

They’re immaterial details relative to the big picture.
 
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Gordon Gekko said:
With long-term returns of around 7%, tax at a blend of 33% and 52%, and investment costs of, say, 1%, please enlighten me as to how investment beats overpaying an average mortgage rate of circa 3% “considerably”…
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forecasts....you appear to be using a forecast as a certainty, a tad unfair especially given that Schroders own forecasted 10 year returns for 2020 were significantly under the actual return of the market. However, Cardano doesn't need forecasts or modelled returns, his investments actually beat the market. just pure dumb luck eh but he still beat the market. The other point on using forecasts, Schroders is using a methodology to model the entire market, Cardano is not investing in the entire market, he is investing in specific industries. So it should be entirely obvious that investing can significantly beat a mortgage rate or there simply wouldn't be an equity market. Obviously anybody with the size of portfolio as Cardano should be reviewing the economic outlook for the markets they are invested in, but that doesn't make his statement incorrect.


confirmation bias........you've already been shown that if you invested in the S&P500 for the last 5 years you would have beaten the weighted averaged irish mortgage rate of the last 5 years. (I am purposely using my own form of confirmation bias here to prove the point)
 
This is becoming funny actually…

Yes, the Schroders work is a forecast, but you do realise that there is a lot of data out there for how markets typically perform from certain levels, yes?

You, and others, seem wedded to the idea that recent memory is typical.

You also seem incapable of understanding risk. If I can lock in a guaranteed return of 5% today, it would be foolish of you to gloat over outperforming me by, say, a couple of percent. Mine was the smart move.
 

They might be immaterial in your fictitious world of people getting 200k on a daily basis and banks offering 200k remortgages at a drop of a hat. In the context of the OP and for the majority of people and the current level or mortgage rates we are talking about much smaller numbers and the margins do matter.

So should I or shouldn't I consider ancillary costs when switching mortgage?

At least you have finally admitted it isn't the same.
 
Since we're going back to your advice to me...

Firstly, your maths is a good bit off. You haven't factored in the cost of interest on the 400k I borrowed to make that investment.

Then if we look at what you actually recommended I invest in:
- 300k in dividend paying value stocks,
- 80k in REITs (again, income paying)
- 20k in Crypto (I'm going with the fruity option!)

But somehow, that's going to generate the same CAGR as the S&P500 over the past 20 years, but at CGT rates rather than income tax?

Getting past that, when I pointed out that the approach was ridiculous in my circumstances, you justified it by providing your own returns based on a completely different strategy!
 
Where do I start?

- The 7% includes dividends which aren’t taxed at 33% last time I checked

- What about currency? You’re jumping from Dollars to Euros and back again…

- Gordon Gekko wasn’t an employee so who was going to sack him?

- You have no visibility of my investment, income, or debt profile; but as it happens, I overpay the maximum permitted mortgage amount, 10%, and then invest the excess in a diversified portfolio of global equities. I’m happy enough with that approach and thing it’s the correct one (versus not doing the 10% and investing it instead)
 
I never claimed that it was ‘exactly’ the same…that’s why I repeatedly used the term effectively.

You’re just being pedantic and failing to acknowledge that legal costs and investment costs such as stamp duty or 1% levies are probably comparable in monetary terms.

It’s foolish to keep going on about them.
 
Gordon Gekko said:
This is becoming funny actually…
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Gordon, I don't appreciate that you tend to lean towards insults to try and belittling comments to strengthen your argument. The fact you've had to start with a comment like that I don't really want to engage further but feel it is necessary to straighten out a few points.

Gordon Gekko said:
Yes, the Schroders work is a forecast, but you do realise that there is a lot of data out there for how markets typically perform from certain levels, yes?
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You do realise you have just contradicted yourself? You've said forecasts are ok because there is historical data to show how markets perform from certain levels, then a sentence later you mock people for using historical data to infer future performance....contradiction.

All that other data out there doesn't tell you what is going to happen in the future, they can't predict covid. So please enlighten us how you can be so certain that recent performance in the stock market won't continue? How are you so sure that Shroders quants are right? Are you basing your opinion on the first result from Google? if you delve a bit deeper you'll see a different view across AMs, who do you trust the most? who is right? who has the best model?

It is a fair assumption that Stock markets won't continue the returns we've seen in the last 5 years, but even in the evidence you are using they were wrong before. Who would have thought the stock market would be sitting at all time highs in the middle of a pandemic?!

Moral of the story don't hang your hat on a piece of information you've scrolled whilst sitting on the can.

Gordon Gekko said:
You, and others, seem wedded to the idea that recent memory is typical.
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Yes because calling out confirmation bias and the issue of relying on historical performance to infer future performance makes me wedded to recent memory.

Gordon Gekko said:
You also seem incapable of understanding risk. If I can lock in a guaranteed return of 5% today, it would be foolish of you to gloat over outperforming me by, say, a couple of percent. Mine was the smart move.
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I am not really sure where to start on this point, you've introuduced this 5% return in another post not directed to me, and because I didn't respond I don't understand risk? Nice to know I wasted 15 years as a risk manager on a trading desk, if only I had passed those industry exams....oh wait.

If you can lock in a guaranteed 5% today then there are other assets (riskier) that will pay a premium above this to entice the investment. You didn't make the smart move, you made the move that suited your risk appetite and goals. If you were a firm and had a goal of 10% ROTE, put all your money in a guaranteed 5% would not be the smart move, would it?
 
Cardano93 said:
A Lion doesn’t concern itself with the opinion of sheep
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A British & Irish ‘Lion’? Brendan M, is that you?

Or a ‘lion’ that lives on the open plains of Africa, sleeps for 20 hours a day, and then gets up to do fundamental analysis of Tesla and cryptocurrencies?
 
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