Quote:
Originally Posted by tvp2003
I was told that a moderately aggressive portfolio (which was recommended for a 5 year window) makes about 6-7%... which is obviously better than 5.1%, but the latter is essentially guaranteed and tax free (important now that I'm in a high tax bracket - yay!).
P.S. Thanks to everyone for their input  |
It's nice to get to the point in your life when you have some money to spend.
A couple things you mentioned made me want to comment.
1. You are in a high tax bracket.
- don't forget to consider how much will be taken from you when you withdraw the money. 30% is quite likely if it's in an RRSP when you withdraw it so your possible 7% taxable return becomes 5%. You will get a tax refund so consider putting that money on the mortgage as an extra payment.
-If you invest it outside of an RRSP you'll have to pay Capital Gains, Dividend or Interest tax when you withdraw. I don't want to do the math but you should.
2. You are looking to reduce your mortgage payment in 4-5 years.
-Paying down your mortgage is the only way to do this. If you make a lump sum payment now, your done. 5.1% in the bank.
Leveraging the equity in your home to invest seems a little risky for you IMO. It's true that the
interest cost to borrow money for an investment is tax deductible but you could in fact be faced with the reality of having your investment fall in value. Your $10,000 nest egg could become $8,000 and you'd still have to pay the debt on the $10,000 loan for example.
To me this seems like a better strategy for long term money but I am of the mind that you can't make money if you lose it. (ie very consevative)
As I said when I started this post, It's nice to get to the point in your life when you have some money to spend.