I found this through NPR's Planet Money Blog:
http://modeledbehavior.com/2011/03/16/in-which-i-try-not-to-go-shrill/
My favorite part:
"Ok, so yes you should leverage your house to the maximum the bank will allow. You should always leverage to the maxim your counterparty will allow.
If you don’t get this then you don’t get the concept of “Other People’s Money” which is fundamentally superior to your own money, because it belongs to someone else. If you lose it, they are screwed. They could try to screw you in return but it is always harder to re-screw than to screw.
If there is screwing to be done you want to be the first one to screw, not the last. This is applicable in many contexts, but especially in finance."
I also love the title of the article and therefore I will now bookmark this blog.
Sunday, March 27, 2011
Saturday, March 5, 2011
Put Your Money Where Your Mouth Is
Well, obviously, the best thing to do is some combination of investing in a house, Chinese mutual funds, regular US mutual funds, and online gambling. Let's think about the best way to allocate our free cash...
I see investing in a house as a long-term investment. It really starts to make sense once you are able to pay it off which takes a long time. Just for giggles I made this amortization model which I'm happy to share with you, my loyal readers. Click on the link to download it: Mortgage Example.
Jesse, Alan, and I continued the conversation from the last post through email, and I will post some highlights here just for the sake of reminding myself. It started with a link to these sites, which I find very informative:
1. House prices vs. Inflation
2. Excel file for above
3. History of Fed Funds Rate
I bought my house in September 2004 which appears to be more than halfway up the bubble. So, it wasn't the worst time to buy, but I was pretty close. Looks like if you got in around 2001, you are golden. If you bought in early 2006, you probably paid too much. I'm wondering how much of my extra cash I should put towards extra payments on the principal of my house vs. other investing options.
I think about how great it would be to have my house in Memphis paid off and just collecting rent.
I think a cool short term investment would be a mutual fund invested in China. I may start looking into this.
Meanwhile my 401k and Roth IRA are invested in normal old mutual funds and bonds and whatnot.
Somebody do some math and tell me how to allocate please.
I see investing in a house as a long-term investment. It really starts to make sense once you are able to pay it off which takes a long time. Just for giggles I made this amortization model which I'm happy to share with you, my loyal readers. Click on the link to download it: Mortgage Example.
Jesse, Alan, and I continued the conversation from the last post through email, and I will post some highlights here just for the sake of reminding myself. It started with a link to these sites, which I find very informative:
1. House prices vs. Inflation
2. Excel file for above
3. History of Fed Funds Rate
I bought my house in September 2004 which appears to be more than halfway up the bubble. So, it wasn't the worst time to buy, but I was pretty close. Looks like if you got in around 2001, you are golden. If you bought in early 2006, you probably paid too much. I'm wondering how much of my extra cash I should put towards extra payments on the principal of my house vs. other investing options.
I think about how great it would be to have my house in Memphis paid off and just collecting rent.
I think a cool short term investment would be a mutual fund invested in China. I may start looking into this.
Meanwhile my 401k and Roth IRA are invested in normal old mutual funds and bonds and whatnot.
Somebody do some math and tell me how to allocate please.
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