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Author: Loren10 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Re: Future balloon payment Date: 6/4/2004 3:27 PM
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TwoCybers wrote – "These levels of return are averages over long periods of time. Yes equities may average 10% over 100 years. Take a look at all 5 year segments and find out how many you find unacceptable for your 'plan'"

Didn't I say that? – “The variability of such an investment is too high for what I have in mind and a 5 year time frame is too short to reasonably target a 10% return overall.”




I'm not a fan of debt either, but I am a fan of higher overall returns. And I especially like saving taxes when I can. If I can deduct my mortgage interest against ordinary income for 5 more years and then pay tax on my invested funds at capital gain rates, in 5 years, I will come out ahead - as long as I “protect” my invested capital and earn at least 5% on my money.

“Protection” and/or “risk” is relative. Everything in life involves some risk. Even paying off the mortgage today involves some risk: opportunity risk. If I pay off the mortgage, I won't have the funds available for potential opportunities - or rainy days - that may come my way in the next 5 years. For example, if I need the money in 3 years for a medical emergency, paying off the mortgage today might end up costing me more than my shirt. I've already learned the hard way how little medical insurance actually pays.

I'm looking for relatively safe investment ideas that will yield 5-7% deferred gains taxable at capital gain rates. Lokicious has a good idea with the Vanguard Target Retirement Funds, although as he points out the gains won't all be deferred or taxable at capital gain rates. I'll look into that, though. Also, nmckay's idea on protecting my down-side on equity investments with stops is a good idea. Not bullet proof, but it probably would reduce my overall downside risk if I invest in equities.

There's got to be some other ideas out there. What are asset backed securities and how are they taxed? What about hedging ideas, like nmckay's stops?
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