Downpayment or Investments?

[ickyflex]

Got a new build coming up due in November so I'm looking to get an answer from those who may be familiar with what the best options are.

All my capital is currently invested + the 25g cash in RRSP for First Time Buyer Credit.

I can sustain the mortgage without dipping into my investments, but I was curious what would be the best route to go.

A) Dump everything into down payment and do nothing after
B) Dump half into down payment and leave the 50% invested in equities
C) Dump everything into down payment and use HELOC to re-enter investment positions (provided they pay a dividend of which you can write off interest) (well 85% of the positions since you can't take 100% out)

Feel free to PM me if needed

[mazdavirgin]

:dunno: Liquidity has a lot of intrinsic value on it's own. Means you're not screwed if you lose your job or life circumstances happen. Trying to move an asset like real estate in a bad market can be a very lengthy ordeal. I frankly cannot see any reason why you would want to put all your eggs in one basket.

Put the minimum you can down and still have reasonable month to month payments. Keep the rest invested into something liquid like equities or whatnot.

[Strider]

Originally posted by ickyflex
Got a new build coming up due in November so I'm looking to get an answer from those who may be familiar with what the best options are.

All my capital is currently invested + the 25g cash in RRSP for First Time Buyer Credit.

I can sustain the mortgage without dipping into my investments, but I was curious what would be the best route to go.

A) Dump everything into down payment and do nothing after
B) Dump half into down payment and leave the 50% invested in equities
C) Dump everything into down payment and use HELOC to re-enter investment positions (provided they pay a dividend of which you can write off interest) (well 85% of the positions since you can't take 100% out)

Feel free to PM me if needed

You lost me at $25k in RRSP for Home Buyer's Plan. Are you saying you took (or are planning to take) $25k out of a sheltered account (RRSP) to put into unsheltered? :nut:

Nobody else can really answer for you, because the answer depends on your own outlook on the markets (also how well you pick investments) and your risk tolerance.

A is the safe approach (guaranteed after-tax return equal to your mortgage rate), C would be higher risk higher reward approach, B doesn't make sense (instead, you'd put 100% in and HELOC 50% back out to invest). I would only consider C if you've already maximized your RRSP and TFSA and have >20% down to avoid CMHC.

[ercchry]

Get something like a manulife one account and do option C, no point in paying more interest than you have to

[Sugarphreak]

...

[Xtrema]

Originally posted by ickyflex
I can sustain the mortgage without dipping into my investments

I see very little reason to put $ toward a house right now since mortgage rate is all time low.

If you don't have to liquidate in order to buy your house, don't. Keep investing.

[roopi]

Take the $25k out via RSP HBP for sure. If you are comfortable investing then I would get a Heloc and use the money to invest so you can write off part of it as you said.

Even if you don't need the RSP money for down-payment withdraw it and put it towards your house. Then just recontribute to get the tax credit (assuming you have the room). You only need to pay it back over 15 years I think.

[Disoblige]

Originally posted by roopi

Even if you don't need the RSP money for down-payment withdraw it and put it towards your house. Then just recontribute to get the tax credit (assuming you have the room). You only need to pay it back over 15 years I think.
What do you mean re-contribute it to get your tax credit? The $ you recontribute through RRSP doesn't count towards tax credit, does it? I thought no, because on your taxes it asks you how much you are repaying and that doesn't count towards lowering your income.

[Strider]

Originally posted by ercchry
Get something like a manulife one account and do option C, no point in paying more interest than you have to

When I was shopping, the interest rates on M1 were horrific. Better off to do separate mortgage and HELOC (unless he needs readvanceable).


Originally posted by roopi
Take the $25k out via RSP HBP for sure. If you are comfortable investing then I would get a Heloc and use the money to invest so you can write off part of it as you said.

He'll still pay taxes after writing off the interest on the $25k borrowed back out to invest, so how is this better than leaving it in the RRSP where returns aren't taxed?


Originally posted by Disoblige
What do you mean re-contribute it to get your tax credit? The $ you recontribute through RRSP doesn't count towards tax credit, does it? I thought no, because on your taxes it asks you how much you are repaying and that doesn't count towards lowering your income.

When you make a contribution after taking out HBP, you designate how much is contribution and how much is repayment. So if OP doesn't regularly max out his RRSPs, he could take out the $25k and put it all back next year, designating 1/15 ($1666) as repayment and $23,333 as new contribution (up to his deduction limit of course), thus triggering a tax credit on the following year income.

[tonytiger55]

ickyflex,
It depends on your goals and understanding your financial profile.

By that I mean what are your goals for the next five years, ten years or even 15/20 years?

This has a bearing on whether you should take money out of your investments. Do you have a emergency fund, what are your expenses, what is the age of your vehicle, are you married (kids, etc), do you have funds for a planned life event (Marriage, kids, mid life crisis, divorce etc)..?

Your financial profile has a major impact on the choice of A B C. So its hard to say.

Ideally you want to put at least 20% down or more on a property. Then go from there.

Your investments should be planned for 5years+ plus. Anything less then you are at a high risk of market fluctuation. But again, this depends on your goals and risk tolerance.
Borrowing to invest I would not personally recommend, unless you really know what the hell you are doing in the financial markets.

I would strongly recommend speaking with a financial planner. If you sit down and plan this out with one, its much better and helps you navigate market and life's ups and down.

[Buster]

rent

[ercchry]

Originally posted by Strider


When I was shopping, the interest rates on M1 were horrific. Better off to do separate mortgage and HELOC (unless he needs readvanceable).





like being the key word, lots of different products, MCAP has a decent one, think the heloc portion is P+0.5

Just easier to use manulife's as the example since it's so well known

[zhao]

Originally posted by tonytiger55
ickyflex,
It depends on your goals and understanding your financial profile.

By that I mean what are your goals for the next five years, ten years or even 15/20 years?

This has a bearing on whether you should take money out of your investments. Do you have a emergency fund, what are your expenses, what is the age of your vehicle, are you married (kids, etc), do you have funds for a planned life event (Marriage, kids, mid life crisis, divorce etc)..?

Your financial profile has a major impact on the choice of A B C. So its hard to say.

Ideally you want to put at least 20% down or more on a property. Then go from there.

Your investments should be planned for 5years+ plus. Anything less then you are at a high risk of market fluctuation. But again, this depends on your goals and risk tolerance.
Borrowing to invest I would not personally recommend, unless you really know what the hell you are doing in the financial markets.

I would strongly recommend speaking with a financial planner. If you sit down and plan this out with one, its much better and helps you navigate market and life's ups and down.


This..... except for telling him to put down 20% or more (That may or may not be retarded advice for his situation).

OP: Everyone's financial goals are different, and talking to someone who can help you figure out where you want to be and how you want to get there is better than taking the advice of random people on the internet. The guy saying do XYZ may have polar opposite goals or opportunities to you.

But to add to the crap pile of advice that may or may not be terrible advice for you (personally I like mazdavirgin's advice as well):

- I'd do 20% down and not a dime more (gotta avoid wasting money on CMHC insurance) if you plan to move again soon. Minimum downpayment if this is your forever home.
- I'd also empty your 25k RRSP for the downpayment (assuming you have room in your tfsa)
- I'd put every dime into a TFSA and go with investments that are as high risk as you can stomach while you are young.
- any spill over I'd put back into the RRSP

That is what is ideal for me, as the money in a TFSA work far better for me IMO. (IMO in general a TFSA is a better retirement vehicle more often then not. The 2 major upsides to a RRSP over a TFSA are 1) your contributing at your marginal tax rate which is high (or at least it is for the beyond ballers), and you will be withdrawing at your average tax rate which will likely be far far lower, and 2) people have poor financial willpower and will be tempted to withdraw from tfsas. Much harder to do that from RRSPs).

The upside to a TFSA is its non taxable income when you pull it out, which when you are retired affects how much government support you get. Make zero taxable income and right now there are perks. Bring in lots of income from your rrsps or pension, and you'll recieve less from the government. Also, when people contribute to a RRSP they do this: Contribute 10g. Get 3g back, spend 3g on some bullshit (That right there makes a TFSA a better investment). It is far easier to pull out and put back in case of an emergency. Tax rates of the future aren't guaranteed either, but rarely do tax rates go down. If we are taxed more in the future on income and your taxable income remains constant then RRSPs make less sense vs using a TFSA.



If you make a fortune and are upper tax bracket, I'd do something different though.

[KappaSigma]

Originally posted by Strider


When I was shopping, the interest rates on M1 were horrific. Better off to do separate mortgage and HELOC (unless he needs readvanceable).



He'll still pay taxes after writing off the interest on the $25k borrowed back out to invest, so how is this better than leaving it in the RRSP where returns aren't taxed?



When you make a contribution after taking out HBP, you designate how much is contribution and how much is repayment. So if OP doesn't regularly max out his RRSPs, he could take out the $25k and put it all back next year, designating 1/15 ($1666) as repayment and $23,333 as new contribution (up to his deduction limit of course), thus triggering a tax credit on the following year income.

Best to call manulife as they typically beats whats posted. I have a manulife one account and just did 5 year fixed 2.54%

[Feruk]

There are only two numbers I see as significant:
a) 5% down
b) 20% down

These are the only two options I'd even look at. Option "a" is nice because you can use the other 15% to invest, which will more than make up CMHC fees. The suggestion that you're "wasting money" on CMHC fees is nonsense. It's an insurance policy for someone else that allows you to have more money to invest with (or as a rainy day fund). Only downside is these mortgages are "recourse" meaning they can go after other assets if you default. Option "b" is a better option if you ever worry about defaulting as the mortgages are "no recourse" meaning you can walk away from the house and they can't target other assets.

I think interest rates will bring down housing prices significantly. Because of that, I've chose option "b." Your opinion may be different.

5% or 20%. No other number makes any sense.


Originally posted by Buster
rent
Best answer.


Originally posted by Strider
A is the safe approach (guaranteed after-tax return equal to your mortgage rate)
False. With interest rates likely to rise, the underlying assumption that home prices will always rise is likely to be untrue.

[ercchry]

Most 20% down are still insurable on the backside, if you want true no recourse just purchase something for over $1m

High ratio gets you about 10 point better rates too

[zhao]

Originally posted by Feruk
[B]The suggestion that you're "wasting money" on CMHC fees is nonsense.

Not true for a lot of people.

Your average person doesn't normally have money to invest, and wont invest or wont go with an investment you are thinking of even if they did; they'll spend that money on crap. Your average person 'likes' being in debt up to their eyeballs and doesn't understand anything about investing as well. Your average first time home buyer is likely not buying a home they will live in forever either.

....People dont even understand buying a car and how the financing/leasing on that works.

All that translates into saving 10g or whatever on CMHC fees might be their best bang for buck investment ever on that 15% lump sum of their purchase price.

Even if they are somewhat investment savy, they can probably only bank on getting a 6% return on a mutual fund after MER fees. That means if they sold their home in the first 3-4 years, they likely just lost money. If its a period of recession, their mutual fund is likely not even doing 6%. In that respect, paying CMHC fees is wasting money.

The math is: are you pretty sure you can make more money on that amount than the CMHC fees before you have to sell your home? If you can, 5%, if you can't, 20%.

[OTown]

Are you able to pay the 20% down without dipping in investments? If not; I would highly encourage you reaching that plateau before doing any investing due to CMHC fees. I doubt you will see returns in investment close to the thousands of dollars it will cost to cover the CMHC fees (which just recently went up, BTW). Theres no sense of losing money on such fees if you have the capital to avoid it.

I personally did the RRPS HBP and don't regret it one bit. I basically see it as a one time interest-free loan I gave to myself to save interest in the first few years of the mortgage. Just make sure you have the sufficient funds to reallocate to it prior to the 15 year limit or else you will be in a world of tax-pain.

[Feruk]

Originally posted by zhao
Your average person doesn't normally have money to invest, and wont invest or wont go with an investment you are thinking of even if they did; they'll spend that money on crap. Your average person 'likes' being in debt up to their eyeballs and doesn't understand anything about investing as well. Your average first time home buyer is likely not buying a home they will live in forever either.
If you've saved up 20% for a down payment and can choose what to put down on a house, you're likely good with your money.

Originally posted by zhao
Even if they are somewhat investment savy, they can probably only bank on getting a 6% return on a mutual fund after MER fees. That means if they sold their home in the first 3-4 years, they likely just lost money. If its a period of recession, their mutual fund is likely not even doing 6%. In that respect, paying CMHC fees is wasting money.
1) 6% is about the average across a long period of time. That period would include booms as well as busts. In a boom year, you'll make way more than 6%. The 6% is not a representation of good years.
2) Unless there's a really hot market, you'll most likely lose money on selling a house in 3-4 years regardless of what the down payment is.

Originally posted by zhao
The math is: are you pretty sure you can make more money on that amount than the CMHC fees before you have to sell your home? If you can, 5%, if you can't, 20%.
Agreed on that.

[Strider]

Originally posted by Feruk
False. With interest rates likely to rise, the underlying assumption that home prices will always rise is likely to be untrue.

OP has already bought a house, he's already committed to the risk attached to the underlying asset and owes the bank principal and interest. Unless house prices drop >20% and he walks away from his house, paying his mtg will be the highest guaranteed return.

[Feruk]

Originally posted by Strider
OP has already bought a house, he's already committed to the risk attached to the underlying asset and owes the bank principal and interest. Unless house prices drop >20% and he walks away from his house, paying his mtg will be the highest guaranteed return.
Once again, riddled with the same real estate value assumption that makes the word "guaranteed" invalid. After that, house is almost certainly not highest return.

[keyjey77]

ickyflex,
you'd better turn for some professional advice, because the question is rather complex. here are some mortgage tips that should be relevant https://tranio.com/traniopedia/tips/foreign-mortgages-top-10-hidden-pitfalls/. and moreover Forbes' forecast for 2017 in real estate is overall rather optimistic (no matter what https://www.forbes.com/sites/samanthasharf/2017/01/03/housing-outlook-2017-eight-predictions-from-the-experts/#20a705f47fa0) and I believe it's still wise not to put investments on hold. your plan B seems to me more approachable, but you should research the opportunities thoroughly anyway

[Gestalt]

Always pay off your mortgage first.

Everything becomes easier after that, and if you feel you need to invest in something, you have a very large equity to borrow against for whatever real opportunity comes along.

Going into debt, hoping for meager gains is a fools errand.

[ercchry]

Originally posted by Gestalt
Always pay off your mortgage first.

Everything becomes easier after that, and if you feel you need to invest in something, you have a very large equity to borrow against for whatever real opportunity comes along.

Going into debt, hoping for meager gains is a fools errand.

He says to probably one of the most consistent, long running investors on beyond :rofl:

I know people worth deep 8 figures who still hold mortgages on properties they could pay for with their pocket change... must be doing it wrong :eek:

[Gestalt]

Originally posted by ercchry


He says to probably one of the most consistent, long running investors on beyond :rofl:

I know people worth deep 8 figures who still hold mortgages on properties they could pay for with their pocket change... must be doing it wrong :eek:

I know a guy too.

[ercchry]

I think you heard me wrong... people, plural

[zhao]

Originally posted by Gestalt
Always pay off your mortgage first.

Everything becomes easier after that, and if you feel you need to invest in something, you have a very large equity to borrow against for whatever real opportunity comes along.

Going into debt, hoping for meager gains is a fools errand.

THat is your opinion, but have you actually worked out numbers and can you explain it?

My math says paying off your mortgage first is a terrible idea.

take a 400k mortgage on a 500k house with 20% down. Say both guys are 25 years old. lets average a 3% interest rate over 25 years for simplicity's sake. payments of 1893, total cost of 400k mortgage is something like 575k

say you make double payments and pay it off in <9 years. with 400k equity from the house. 3 years of investing 3786 a month = 150k ish. total equity 550k

say instead of making double payments, you invest taht 1893 a month in a conservative mutual fund, and say it gives lower than average of 5%. the investment after that same 12 years will be 375k or so.... but you'll also be half way into your mortgage, and will have paid about 275k of it off, with 300k owing. So 650k equity assuming no appreciation of the house and no inflation.

----

now in scenario one your mortgage is paid off and scenario 2 you have half of it...... so it's pretty obvious who is ahead at the half way point, but here is where your math starts to make a bit of sense.

So for the guy who paid off his mortgage, now he can contribute all his cash to investments. 3786 a month, over 16 years, at 5% = 1.1k + 400k for the paid off house = 1.5m equity.


Not paying off the mortgage still contributing 1893 to the mortgage and 1893 to investing at 5%, after 13 more years the mortgage is paid off with 400k equity, and the investments are sitting at 1.1 million or so. so 1.5m equity after 1.5 years.


------

so they break even in the end right? Unlikely. At 9 years when dude A has his house paid off, and dude B doesn't, human nature says Dude A is more likely to say fuck it, and not contribute 3786 a month for the next 16 years to investments, then Dude B is to continue on his investment path. Why that is is because Dude A achieved his goal of paying off his mortgage, while Dude B isn't at a pivotal point in his history (he's at 9 years in his 25 year plan).


------

Avoiding human nature we bring up another point. HELOC!!! fuck ya. right? mortgage paid off frees up loan potential for investments!!!

with 20% down, both paths free up just as much money from the Heloc. this means at the 9 year mark their equity is actually equal now. There is now no equity advantage to investing early if 100% of available heloc funds are used to invest as well. however, once one guy has his place paid off, things get interesting.

paid off house = 65% heloc borrowing power. With a mortgage = 80%. Having a mortgage not paid off frees up more cash to invest that way as well, however 1893 monthly at 5% over 16 years = 550k equity, whereas 65% of 400k @ 5% over 16 years = 575k equity.

dude A who paid his mortgage off is actually ahead now by 25k.

-----

However........ human nature again says absolutely no one is maximizing their HELOC every month to make use of every penny available, so guy who doesn't pay his mortgage off early will be the winner almost every time. The Gap will grow wider as well the higher the ROI interest is.

You'd have to be some sorta robot to come out ahead paying your mortgage off earlier.

----

and here is where your idea really falls apart.

RRSPs and TFSA.......... Dude B who has been investing since day 1 has gotten more money back from income tax to reinvest. He has also accumulated far more in his TFSA account thx to maxing it out early and compound interest, so he will pay less tax when he withdraws his investments.

Dude A missed out on 9 years of RRSP contributions to reduce his income tax, and he can't catch up because there are maximum RRSP contributions that Dude B has already been maxing out every year with his 1893 a month investment contributions. I value this at roughly 60k for the benefit in tax returns over 9 years dude B recieved + another 75k or so in compound interest from that money over 16 years.

So not paying your mortgage off first is the smart choice for more than one reason; it doesn't even make sense if you are a robot with your HELOC.

-----

The other thing is, the gap really starts to grow with a higher ROI. a 10% investment means RRSP and TFSA differences translate into about 375k more for the guy who didn't pay his mortgage off early, and that is only at the 25 year mark. Add another 15 years @ 10% putting both guys at 65, and the guy who didn't pay off his mortgage early is ahead by 1.6 million.

Anyway, that's my math.

(hey, maybe I really fucked up the math on that one or didn't factor something in that actually matters, but that's me putting it all out there for you to pick apart. As far as I am concerned you're correct for a lot of people. A lot of people should pay their mortgage off first because they do not understand investments, and wont invest even if they have spare cash)

[Gestalt]

Hopes and dreams, versus something real.

Fantasy girl versus sure thing .

[zhao]

Originally posted by Gestalt
Hopes and dreams, versus something real.

Fantasy girl versus sure thing .

Lol, Your argument is terrible and contradictory. Completely illogical.

It's the financial equiv. of saying the earth is flat and jesus road a dinosaur to work.

Your house isn't worth shit until you sell it. For all you know you're paying off a 500k mortgage on a house that is going to be worth 50k when you sell it. And if you are right that investments could crash year after year and wipe everyone out, you're going to be in a country filled with people with no money, no jobs because all the companies went under, and probably a collapsed government as well, so your house is likely to be burned down and ransacked by loots. Your house is as much a fantasy girl as any other investment is... with the added bonus of putting all your eggs in one basket, whereas anyone investing using diversifies their portfolio.

[Gestalt]

Your house is debt that needs to be repayed.

You should he debt free before gambling with your money.

You need at least 3% better than your mortgage interest to bother with investment versus repayment, and that is gamble. Paying off debt is a sure thing.

Look at the retirement thread. No one in their right mind wants a salary less than $150k a year. But if you are debt free and retiring, they suddenly consider 150 plenty and extravagant.

Owing nothing to no one is a enviable position to be in. Saving then is twice as easy as when you are debt lade

[HiTempguy1]

Originally posted by zhao


Lol, Your argument is terrible and contradictory. Completely illogical.


Gestalt has a point. Would I rather be richer, or stress free?

Stress free 100%. Worrying about a mortgage (which 95% of people in Canada do worry about, especially if kids are involved) is stressful.

Not having that hanging over your head frees you up to do whatever you want, including being more aggressive in earning money/taking risks.

Pretty easy to live if all you have to pay are taxes, utilities, and for your car, even if you have kids. Pretty hard to do this when you are spending close to $2k/month after tax on a mortgage and you lose your job.

The financial decisions you have made and their outcomes I would argue are not typical. Your scenarios you outlined both have risk to them.

Again, if somebody said "you can retire at age 55 with 2mil in assets/money and not have had a mortgage for 20 years" versus "you can retire at age 55 with 3 mil in assets/money but you were only mortgage free for the last 5 years" I'd seriously consider taking the first choice. :dunno:

Most people are NOT good at handling stress. Continuous payments/bills are definitely my number 1 stressor in life. Not everyone enjoys min/maxing their finances every month.

[Buster]

You guys need to think about it in terms of your balance sheet. This is just a typical leverage discussion that occur a million times in a million different ways in businesses and homes around the world.

paying down your mortgage is just de-leveraging, which automatically comes with an opportunity cost on growth-of-capital

investing your capital into higher growth assets instead of paying down your mortgage is increasing leverage, which will see an improvement in your balance sheet over time with increased risk.

Do you think you guys are going to win an argument which is essentially a mathematical equation that risk and return are highly correlated?

Here's the one thing that most people don't take into account, and often can't wrap their head around: your home EQUITY is actually an asset allocation decision. So paying down your mortgage is also a de facto allocation of capital towards residential real-estate as an asset class. If you think putting capital towards residential real-estate is a bad idea, then paying down your mortgage and concentrating your capital around residential real estate is also a bad idea - especially since it's also concentrated in a single asset. Given this fact, then I would suggest that paying down your mortgage is actually a bad idea in the current environment in Canada (perhaps not in Calgary, hard to say). If that stresses you out, then you need to shift your thinking towards your balance sheet, and how to improve it over time instead of thinking like most of the middle-class grinders do.

[zhao]

Originally posted by Gestalt
Your house is debt that needs to be repayed.

You should he debt free before gambling with your money.

You need at least 3% better than your mortgage interest to bother with investment versus repayment, and that is gamble. Paying off debt is a sure thing.

Look at the retirement thread. No one in their right mind wants a salary less than $150k a year. But if you are debt free and retiring, they suddenly consider 150 plenty and extravagant.

Owing nothing to no one is a enviable position to be in. Saving then is twice as easy as when you are debt lade

You're out of touch with how things can work.

I had my finances completely reset in 2009 from my business going under thx to the recession, and taking a year or 2 to repay debts (I did not go bankrupt). By about 2012 I had clawed back to about 30k to my name, no debt, so everything I have now is a result of what happened after that point.

I'm not going to go into a lot of personal details here, but through investing (real estate and now primarily stocks) we have about 1.2m in assets and debt of about 500k and a cost to liquidate those assets of about 80-100k. There is more than one year I literally saw ROIs of around double. Using debt and flipping equity in to new investments was the key to big returns.

I'm also 36. I guess i'm not in my right mind, but why do I need a 150k salary again? I'm doing all this on <100k. I actually bought my first place and did my first flip on 5x,xxx a year.

If you re-read that retirement thread virtually everyone is saying you are on crack with your retirement requirements....... and this is beyond. Average Beyonder Drives a AMG G-wagon for a winter beater and eats at Dorsia 5 nights a week.


So you can stuff your mattress with money for all I care.

[Buster]

Don't take this the wrong way... But don't confuse luck with a strategy that can be applied universally.

[KappaSigma]

Not going to lie. Being mortgage free in early 30s is hella nice. Always time to make money but it sure is nice not having a monthly payment.

[Gestalt]

Originally posted by KappaSigma
Not going to lie. Being mortgage free in early 30s is hella nice. Always time to make money but it sure is nice not having a monthly payment.
Where's the like button.

No better feeling than knowing going to work is optional.

[msommers]

At the risk of looking like a complete bafoon, how to calculate various scenarios discussed here, investment strategies and such are completely over my head and feel like I should really know these things at 30 but I just don't, it's just so dry to me. Obviously will take time but where have you guys picked up the knowledge and strategies beyond definitions?

[FraserB]

Originally posted by Gestalt

Where's the like button.

No better feeling than knowing going to work is optional.

Even without a mortgage payment, how is going to work optional? If you have no mortgage, that money should be going to retirement savings, unless those become optional as well once your mortgage is paid off?

[J-hop]

Originally posted by zhao


Lol, Your argument is terrible and contradictory. Completely illogical.

It's the financial equiv. of saying the earth is flat and jesus road a dinosaur to work.

Your house isn't worth shit until you sell it. For all you know you're paying off a 500k mortgage on a house that is going to be worth 50k when you sell it....

I constantly hear on beyond the pretty naive mentality that a snapshot of the current equity you've got in your house = your money. Such a bad way to look at things and the last decade should be a great example of why this idea doesn't hold water...

People forget that housing market downturns often correlate with general market downturn and job loss. Which means if you are forced to sell your house at some point in your life the most probable time will be during a real estate down turn. If you need to downgrade you still need the down payment too so at least 20% of your selling price will be needed for your next house so you have over 20% down (who the hell wants to start from ground level again). So hopefully you haven't used that heloc for something depreciating like a car!!!!

[ercchry]

What? Owner occupied=5% down

[J-hop]

Originally posted by ercchry
What? Owner occupied=5% down

Read my following comment in brackets. Why would you want to start over and again be paying a premium for CMHC insurance?

The person in the example has just hemmoraged cash by selling at a loss. Why would they then plan to hemmorage further because they didn't account for a 20%+ down payment on their next house. Yea obviously they are downgrading so they wouldn't need the full 20% of the house they're selling assuming they sell and then buy houses that both track the trend, I'm being conservative. Say 15% then.

[Gestalt]

Because gambler investors would rather finance the cmhc fees than pay the additional $100k down, so they can invest the down payment, and dream of those 20% returns.

[KappaSigma]

Mosy beyonders think they are warren buffett when it comes to investing and returns.

[J-hop]

Originally posted by Gestalt
Because gambler investors would rather finance the cmhc fees than pay the additional $100k down, so they can invest the down payment, and dream of those 20% returns.

Haha, I guess if you think you can invest that 15% and beat the cmhc insurance premium then sure go for it.

I haven't really run the numbers in any detail but my back of the envelope calc says you'd have to be gaurunteed a 5% yearly return on that 15% just to break even each year. Which for some savvy investors would be doable but the average person is lucky to beat that by much over the long term. That is assuming that you have that 15% in cash and aren't taking out a loan to invest.

Sounds like a horrible idea, very little upside and potentially even further downside but maybe I'm missing something.

[HiTempguy1]

Originally posted by KappaSigma
Mosy beyonders think they are warren buffett when it comes to investing and returns.

I do always like it when Buster gives investment advice, considering he admitted to having less than a mil in assets and he's 42 (all info he provided).

In fact, the number he said he himself had was $300k. So either he reads a lot of investment blogs and knows how to talk the talk but not walk the walk, or something else is going on. :dunno:

Either way, Beyond is not remotely close to who the average person should be going to for investment advice. Not because Beyond isn't smart, but because most of what is talked about is not applicable for your average schmuck.

Zhao, quit humble bragging. You're 36 dude. Give me 8 years and a crazy rebound in the market from the recession and I too will be budget baller rich like you (but still racing). F*&k, you're old :poosie:

[Buster]

Originally posted by HiTempguy1


I do always like it when Buster gives investment advice, considering he admitted to having less than a mil in assets and he's 42 (all info he provided).

In fact, the number he said he himself had was $300k. So either he reads a lot of investment blogs and knows how to talk the talk but not walk the walk, or something else is going on. :dunno:

Either way, Beyond is not remotely close to who the average person should be going to for investment advice. Not because Beyond isn't smart, but because most of what is talked about is not applicable for your average schmuck.

Zhao, quit humble bragging. You're 36 dude. Give me 8 years and a crazy rebound in the market from the recession and I too will be budget baller rich like you (but still racing). F*&amp;k, you're old :poosie:

huh?

You must be thinking someone else?

Also, quit adding years to my age. lol

[zhao]

Originally posted by HiTempguy1


I do always like it when Buster gives investment advice, considering he admitted to having less than a mil in assets and he's 42 (all info he provided).

In fact, the number he said he himself had was $300k. So either he reads a lot of investment blogs and knows how to talk the talk but not walk the walk, or something else is going on. :dunno:

Either way, Beyond is not remotely close to who the average person should be going to for investment advice. Not because Beyond isn't smart, but because most of what is talked about is not applicable for your average schmuck.

Zhao, quit humble bragging. You're 36 dude. Give me 8 years and a crazy rebound in the market from the recession and I too will be budget baller rich like you (but still racing). F*&amp;k, you're old :poosie:

Well, go do it then? No reason you can't, you even make more than me so it should be easy, but dont count your chickens until they hatch is my advice.

You dont need a rebound in the market either. A significant portion of my money came from the recession. IMO for everyone that loses a dollar there is someone that makes a dollar. I was lucky enough to be making decent money in the last few years and was able to have disposable income to buy when others had to sell. I'm not doing that great either by beyond standards; you dont see me shopping for G-wagons and million dollar condos like that's chump change.

And it's not humble bragging, it's stating a fact to disprove a guy who thinks investing is a scam. And unlike lap times, I couldn't care less about comparing myself to others when it comes to investments. It's not a competition, but to see a guy try and discourage people from investing, which is pretty much the only way anyone is probably going to be able to retire comfortably in the future, is frankly a pretty big piss off.

[HiTempguy1]

Originally posted by zhao


And it's not humble bragging, it's stating a fact to disprove a guy who thinks investing is a scam. And unlike lap times, I couldn't care less about comparing myself to others when it comes to investments. It's not a competition, but to see a guy try and discourage people from investing, which is pretty much the only way anyone is probably going to be able to retire comfortably in the future, is frankly a pretty big piss off.

To act like investing isn't informed gambling is giving investing too much credit. A lot of us have seen friends and family decimated by the stock market. And you know who always came out ahead, up or down? Random lucky people and the rich ones.

Your measly $1mil pales in comparison to the billions of dollars at others finger tips that can legitimately move whole markets, let alone just a single stock. Look at home capital, there is ONE individual who really f"*ked them over. Bloomberg has an article, its pretty fascinating.

So yes, typical schmucks should run the couch potato method or the like and keep slowly investing while being diversified. But dont act like investing is the be-all-end-all. I'm investing in real estate and my business. With those, plus pension (at least until the business is going full steam, then pension will become investments) I'm pretty happy with where things are.

[Gestalt]

Exactly. Gambling as no one has a crystal ball, and the big Billionaires​ make things happen and manipulate markets, politicians laws and policy.

Doing well for the most part for anyone else means you got lucky. But human nature takes over and you think you were skilled.

As zhao said, for every dollar made, there is a dollar lost, and for the most part the system is rigged against us.

Like gamblesrs sitting at slot machines, you only hear stories of when they won. Even they forget all the losing, or they would not.continue to sit at the machine.

Paying your debt off is the only strategy that's a sure thing, and is the most liberating one. In financial system that is designed on being a spender or consumer, you only win by saving.

[Buster]

IMO for everyone that loses a dollar there is someone that makes a dollar.

Actually, this is untrue.

Wealth can grow, and not just nominally, in real terms. Capitalism allows for two people to put a dollar each into a pot, create one dollar and take out 3 between the two of them. It's a beautiful thing.

On a large scale, the economy is not a zero sum game, and investment (ie the capital markets), are the reason why.

[Gestalt]

Originally posted by Buster


. Capitalism allows for two people to put a dollar each into a pot, create one dollar and take out 3 between the two of them. It's a beautiful thing. y.
That's counterfitting.

Capitalism is getting together making a product. If your product has a buyer with money, there is a transfer of wealth.

They can also use credit obtained through capitlaisms fantasy of fractional reserve lending, but those benefits are mainly for the billionaire class who makes the rules.

[Buster]

Wrong.

If I give you $10, but get back something that allows me to produce $12 worth of goods, then we have increased the overall wealth by $2.

The world gets richer every year.

It's not a zero sum game.

[Gestalt]

It's only worth $12 if there is a buyer with money. You don't get the $12 out of thin air. It already exists, someone hands it over in exchange for your good.

[zhao]

buster is correct. In the grand scheme of things we are generating wealth.

I was talking more in a 1 on 1 short term transaction mentality. When a stock or the entire market crashes, and 'everyone' is losing their shirts, people are still buying everything that gets sold, and fortunes can be born that way. One mans loss is another mans gain in that case.

As far as the world goes, as long as we are growing shit, pulling shit out of the ground, and turning worthless crap in to stuff of value, we are generating wealth.

The world is basically trading time for wealth. Dont believe that? Go back 10000 years and compare wealth then to now.

[Gestalt]

The money supply is finite at a e given time
Only a central bank can create more.

If you polish turds, and convince people they are valuable, you can increase your own personal welth, by having someone give you some of theirs. Don't confuse polishing turds with creating wealth. It's simply a transfer of waelth.

In a finite money supply system like ours, wealth is simply relativity. If you have more than the next person, you might be wealthy.

Wealth is not everyone having a TV, or a plow or a cicle.

https://en.m.wikipedia.org/wiki/Fiat_money

[Buster]

If you have two people working independently, their labour is worth X. If they can manage to cooperate and work together, their labour is no longer worth 2X. It is worth 2X plus the efficiency of their cooperation. You are thinking too much about "money" and not enough about "capital". The more efficiently an economy or social system can allow those two people to work together, the greater that additional factor is. After all, when people exchange their labour for money/capital/a good, they are simply cooperating by dividing their duties/specialties.

I like that you are thinking about these things, but you need to dig deeper into the concepts.

[Gestalt]

Don't backtrack becaus you are wrong.

Zhao siad clearly IMO for everyone that loses a dollar there is someone that makes a dollar.

This is about dollars. Money. Not whimsy.
You yourself cannot create it, it can only be transferred. For you to have more, someone must have less. Pretty simple.

[Buster]

You're not thinking deep enough into the concept behind money. Money is simply a proxy for a claim on future labour.

Retreating into semantics like that is not useful, and won't help you understand the concepts better. Investment of capital does not require a winner and a loser. It can create two winners. That's the failure of reasoning that is going on here. Frequently there ARE losers. But it is not a requirement.

[Gestalt]

I understand the concept fine, you are now just getting into weirdo mumbo jumbo.

I am retreating into accuracy. You are drifiting of into fantasy.

[Buster]

I actually like that you are thinking about these things. Most people don't even bother. Some of these concepts are not immediately intuitive, though...and take some thinking (or reading) to understand properly. How capitalism can create wealth without there being "losers" as part of the process is, I guess, one of those concepts.

But if you can wrap your head around that idea, it's actually a pretty important foundation to separating the signal from the noise when talking about some of the other issues - like stock market crashes and bubbles, and who benefits from them, etc.

[holden]

Wealth may be denominated in dollars, but that doesn't mean you have to hold dollars to have wealth.

If I have $1M and use it all to buy a house, does that now mean I am worth 0?

Also, imagine there are 100 total shares of a company that were bought for $10 each. If the next time somebody trades a share and it is for $100, that would be the value for all 99 other shares. That is how market cap of a company is calculated. It's also how people like Mark Zuckerberg and Bill Gates are worth 10's of billions of dollars, without actually having it in the bank. They didn't necessarily gain all their wealth by taking it away from other people.

[Gestalt]

Stock market is the other fairy tale. It's like over selling a Delta flight, except no one cares, and actually cheers it.

But again, it's only worth anything if someone with money is willing to pay for it. That's capitalism 101.

It has no value otherwise, except as emocion.

You guys are drifting off into feel good slogans, and undefinable concepts.

I think health is wealth. Prove me wrong. :zzz:

We are talking about money. It has a fixed quantity, Central banks create money. If you create it, it's called couterfeit. To get more, someone with it has to give it to you.

[Buster]

you aren't thinking deeply enough into the concepts behind "money" (which you are associating closely with "currency"). You think it's an undefinable concept because you haven't quite wrapped your head around it.

But people can define and trade wealth in many other ways. Some of the easiest to conceptualize might be, say, airline points. They aren't currency, but still have value. Gov'ts prefer for people to think that currency is a monopoly, but it really isn't.

[Gestalt]

Originally posted by Buster
you aren't thinking deeply enough into the concepts behind &quot;money&quot; (which you are associating closely with &quot;currency&quot;). You think it's an undefinable concept because you haven't quite wrapped your head around it.

But people can define and trade wealth in many other ways. Some of the easiest to conceptualize might be, say, airline points. They aren't currency, but still have value. Gov'ts prefer for people to think that currency is a monopoly, but it really isn't.

Stop talking down to me with your mumbo jumbo.

Money and currency are easily defined, I even gave you a link. You are just trying to muddy the water, because you don't understand it.

[holden]

Originally posted by Gestalt
Stock market is the other fairy tale. It's like over selling a Delta flight, except no one cares, and actually cheers it.

But again, it's only worth anything if someone with money is willing to pay for it. That's capitalism 101.

It has no value otherwise, except as emocion.

You guys are drifting off into feel good slogans, and undefinable concepts.

I think health is wealth. Prove me wrong. :zzz:

We are talking about money. It has a fixed quantity, Central banks create money. If you create it, it's called couterfeit. To get more, someone with it has to give it to you.

But money itself is like the stock market, it only has the value that people perceive in it. If the world lost complete faith in the loonie and it became worthless, who would become the "winner" in that situation to balance all the "losers"?

[Buster]

Originally posted by Gestalt


Stop talking down to me with your mumbo jumbo.

Money and currency are easily defined, I even gave you a link. You are just trying to muddy the water, because you don't understand it.

I'm trying to help you up your knowledge level on this stuff. You seem interested and willing to learn. Otherwise I wouldn't put in the effort.

The ideas behind how capital flows (both from one person to another in the present, but also over time) and how currency - as a tool- fits into that framework is interesting stuff. It just seems like mumbo jumbo because you are thinking about all this stuff at a surface level. I'll give you an example. When a person from a country with a poorly functioning capital markets/capital systems moves to a country where there are highly efficient capital systems, their productivity by any measure increases. Sometimes this increase is by an order of magnitude. If an engineer moves from North Korea to California, their productivity would go through the roof. Why is this? It's because their productivity is linked to the cooperation of the productivity of those around them and the economy.

This concept translates directly to the capital markets and even the public capital markets. When you total all of the investment activity of all of the participants in the public markets, you get productivity that grows. This is the concept you are missing when you say that "money is fixed" and "a winner requires a loser".

[Gestalt]

Again, muddying the water and irrelevant.

Tell ya what, you go without using money for 6 months, and I'll go without bartering for 6 months.

Let's see what happens.

[Buster]

It's not irrelevant. It's the basis for the entire conversation. I think you're feeling a slight cognitive dissonance effect here - you know there is more here but it's uncomfortable for you to think outside your current assumptions.

It's really just easier to think in terms of "money", and fiat currency gov't yadda yadda. But understanding the underlying concepts is harder. But it's worth the effort.

[JustinL]

Originally posted by Gestalt
The money supply is finite at a e given time
Only a central bank can create more.


This is only one definition of Money supply.

Give this a read: http://www.investopedia.com/articles/economics/12/fed-money-debt-taxes.asp

Money can be "created" with debt. There isn't a printed or minted note/coin for every dollar in the economy.

[Gestalt]

Justin, that was covered last page.

And the point remains, you or I cannot create currency, or make new money. Central banbks even control lending and debt.


Originally posted by Gestalt

That's counterfitting.

Capitalism is getting together making a product. If your product has a buyer with money, there is a transfer of wealth.

They can also use credit obtained through capitlaisms fantasy of fractional reserve lending, but those benefits are mainly for the billionaire class who makes the rules.

[holden]

Sure you can. I could start printing Holden dollars. They would be worthless until somebody else traded me something of value for it. Voila, wealth created.

Just like bitcoins. They were created and were worthless until the first transactions (I think somebody used it to buy a pizza).

[Buster]

Originally posted by holden
Sure you can. I could start printing Holden dollars. They would be worthless until somebody else traded me something of value for it. Voila, wealth created.

Just like bitcoins. They were created and were worthless until the first transactions (I think somebody used it to buy a pizza).

yup.

Although you would quickly realize how "free" you are from government coercion if you tried to utilize bitcoin for 100% of your commerce.