No. of Recommendations: 6
The fly in the ointment would be finding investments that guarantee 7% return.

Asking for a guaranteed 7% is asking for the impossible. If you want a guaranteed return you have to invest in T-bills....which don't pay anywhere near 7%.


I will even settle for long-term 7% return with large fluctuations (as happens with stocks.)
And the 7% should be within a reasonable horizon. Don't give me 80-year histories - I don't plan to invest for 80 years! Rolling 10-15 years history max.


Now we're talking!

Consult the "Rolling N yr" tab in my S&P 500 spreadsheet. https://www.dropbox.com/s/cbzvg74iyeyfwt6/SPX-monthly-1950-2...

For all rolling 10 year periods (actually all rolling 120 month periods) from Jan 1950 to Jan 2016, the return statistics are:
Avg  10.5%
Med 10.4%
Min -3.5%
Max 19.4%


The average and median are well above 7%, but that worst case of -3.5% would be nasty.
Obviously we'd like to know the likelihood of getting less than X%.
At the low end of the percentile range:
percentile*    This table gives a picture of the worst-case performances.
0% -3.5%
5% 2.2%
10% 3.6%
20% 5.9%
25% 7.0%


So, 3/4'rd of the 10 year periods returned more than 7% and 1/4'th returned less than 7%. The odds are 3 to 1 in your favor.

But he was talking about a 3.5% mortgage. That's just a tad under the 10'th percentile. So.....odds 9 to 1 in your favor.

I'm a great believer in the simple timing scheme that is mentioned in the spreadsheet. With that, the percentiles are:
0% 3.9%
1% 6.3%
2% 7.6%
3% 8.6%

Much better. Much, much better. Here, the *worst* 10 year period was more than the 3.5% mortgage.

This is all historical statistics, of course. There is no way to predict what the next 10 years will bring.
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