Suppose you have 150K in vested AMZN RSUs and your remaining mortgage (4% interest) was 150K. Would you sell to pay off or hold for a longer term in case the stock goes up significantly more? (Assume no taxes on the RSU sale) Please explain your reasoning in comments
Paying off your mortgage will give you a ~4% return? If you think stock can outperform 4% over the life of the loan (very likely) hold stock.
Also depends on your risk tolerance. 4% is guaranteed. The stock performance will likely be higher but has more uncertainty and is highly correlated with your employment (if a bad recession comes or Amazon stumbles stock will be hit as they layoff a bunch of people)
Sure, that's why you should have an emergency fund so you are not at risk if the market falls or you lose your job. If you are super risk adverse just up the time from 6 months to 2 years or whatever makes you sleep better. Chances are this is still lower than 30 years.
Neither. Keep mortgage and sell RSU. Then diversify by buying index ETF or a dozen stocks ( not Amazon) you have confidence in.
Would you take out a loan with an interest rate of 4% to buy 150k in Amazon stocks right now?
Depends on where you are in your amortization schedule. If you’re still in the early curve, pay it off. If you’re late in the curve, it’s mostly principal you’re paying and stocks can outperform your interest rate. Finally remember that mortgage interest is tax deductible. Best to diversify.
Lol, this made no sense. The interest rate is applied to the outstanding balance, it doesn't matter if it's principal or accrued interest
The interested is heaviest at the beginning of the mortgage
I’d sell a portion instead of all of my stocks. One key to investing is never go to one extreme.
Ultimately it seems to be an emotional issue. I’d pay off the mortgage without giving it much thought.
Being debt free is an incredible freedom. Maybe you will come out ahead in theory by keeping the stocks but it's easier to get to the point where you cease worrying about financial stuff when all your debts are gone. With no debt if you get into a tough spot it's easier to scale down your spending to fit your budget, but when your have a $5000/m mortgage payment even if on paper you are coming out ahead you can only cut you expenses so far.
The worst part of paying off your mortgage: realizing you still have to pay rent (property tax) to the government.
4 percent interest is head heavy, I.e. more interest frontloaded. So, first compute your effective interest rate at this point.
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Depends on other finances of course. But most likely pay off mortgage, because can you imagine not having a mortgage/rent payment? 🎉