My mortgage free wannabeness starts here!! :-)

ixwood

The extra retirement money sounds very good. Though I won't prebook my space cruise and Cryonical freezing just yet!

With the pension crisis constantly in the news and my work pension of 8 years being constantly downgraded to the point of being almost being worthless, I had started to think about retirement planning, but figured dealing with e mortgage would be hard enough.

I think I'm already paying more into my investments than the difference between repayment and interest only. I'd like to get to the 7k limit, but doubt I can manage it on my current finances.

Giving up smoking would be a good start. And might help me make that tour of the galaxy when i retire.

ixwood

"So, I'm not keen on repaying as soon as possible. You can be better off if you don't, particularly if you overpay a bit and try to end up with such a large pot that it's really unlikely that the market can fall enough in the final years to upset your plans."

hmmmm. Not sure i am either now! Although the proof of the investments is in the space cruise. Or something.

Looks like I'll be investing every spare penny now then. And just use my slowly growing stooze pot and emergency fund to offset.

Although, I still ideally need to get my capital down to get a new better mortgage in a years time. Any ideas? It'd be nice to use stooze funds, but can't see it happening as presumably the mortgage company would take it into account in their calculations.

ixwood

jamesd wrote:

If you're really determined to overpay and invest the full stocks and shares ISA limit of 583 a month and get 9% after fees, you end up with 97200 after 9 years. At 20 years you end up with 658517. If you took 100000 to repay the whole mortgage out at year 20, leaving 292298 invested, you'd still end up with 501947 at year 25 - enough for a 65 year old man to buy a level annuity paying 15000 a year in today's money (depreciated the fund value by 3.5% inflation rate for 25 years). That sort of possible result beats making the minimum possible payments!

Where do I sign?

I need to brave all the numbers in the links again, clue myself up a bit and start making some decisions.

Consistent returns like that are pretty hard to ignore!! I can't grasp why everyones not already filling their boots. Or are they? I do live in my own little bubble at times. Maybe I just didn't notice.

ixwood

jamesd wrote:

You won't get 9% after fees with very cautious investments but each of the funds I mentioned earlier did over the last 5 years and they aren't high risk.

Dare I ask.... What would be high risk?

ixwood

Where would I find some BRIC info then? I'm going to have a good browse and read up on it all this week hopefully. Fingers crossed I'm not busy at work..

Excuse the silly question, but are Brazil included just to make a nice Acronym? Get Kazakhstan in there for a proper brick!!

lewt

looks like a cunning plan!

jamesd

You can normally transfer funds within a fund supermarket and into one, sometimes it's necessary to sell and possibly buy back or possibly switch fund with the money. Somewhere like Hargreaves Lansdown makes it pretty easy to do, in part by largely eliminating the initial fund charges, which are often around 5%.

I don't recall ever selling a financial services product.

Take a look at this charting tool. Add with "Add Instrument":

Neptune Global Equity A Acc
M&G Global Basics A Acc
Global Growth (use Add parent sector)
Jupiter Fund of Inv Trusts
New Star Global Strategic Capital
New Star Property Acc

The first two are two of the best performing of the global growth funds. Next is the global growth index overall. Then the two multi-manager ones I mentioned. Finally a somewhat random property fund because it happens to be from New Star and that was the manager I had selected at that point.

The two pure funds have high risk and return than the multi-manager funds, which in turn do some performance averaging and reduce their result and risk accordingly. The property fund is interesting because it doesn't swing with the markets, while the global funds do. A defensive fund option.

For BRIC funds you can look at emerging markets for some averaging or at individual countries or regions like latin America. Higher risk as you narrow down the focus of the fund towards one country.

High risk include things like share options, currency trading, individual shares, mortgaged buy to let (invest 15% of 100k, market falls 20% and you're down 20k plus fees, more than your whole investment value).

jamesd

I mentioned property. It's worth taking a look at Aberdeen Property Share Trust and comparing it to New Star Property Acc . The former has higher growth but does show variation with the stock markets. If you look at the holdings you can see it's invested in property companies (securities in the fund description), not properties. But for the new Star fund you can see it's in actual property.

gallygirl

Pardon me for hijacking!!!

James this is a great link, thanks.

Quick question - wiould you still recommend property funds? I thought the 'experts' were saying growth will slow down in these now? (I know its only to form part of portfolio but even so.....)

I'm a typical mortgagee who'd sooner stick with something she understands so just op's on mortgage

jamesd

ali007, I don't recommend anything if I can help it. It's worth noticing that I generally try to just mention what others have mentioned or what shows up at the top of the tables for a particular sector, so I don't get into fund picking and recommending directly. I'm not experienced at doing this so don't treat my comments as you might those of a pro like dunstonh, say.

I don't personally think much of property as a large part of a mix, but if you go for the property funds that own real property, they do have uses.

This evening I was thinking that it might be interesting to start daily shifting of bits of a portfolio into property or gilt or other stable funds when the market is in the process of falling, then start to more slowly move the money back into more aggressive funds as it appears to be recovering.

Personally, I'm more interested in fairly volatile/high risk funds for much of my own mixture. But studies show that people are more upset by losses than pleased by gains, so funds that move down a lot, even if they move up more on average, might discourage people from investing. So it's probably not a good idea for you if you don't like lots of variation.

There is one simple fact, though: long term historically the markets have outperformed overpaying on a mortgage, so anyone who is patient and doesn't mind variations can reasonably expect to do better by investing than overpaying. It's why I'm going with an interest only mortgage and investing the difference between repayment and interest only monthly payments. If I decide I want to have a mortgage paid off on a certain date, I'd consider shifting the funds gradually into property funds with their nice stable growth, to be sure that it would be available on the designated repayment date. If you look at the charts for the property funds that own real property you can see that their performance is pretty stable.

That New Star Property fund managed to average 12.6% compounding annually over the last five years. That’s a lot better than saving 5% mortgage interest with overpaying, even after allowing say 1.5-2% for fees. In 12 month blocks from one year ago through five years ago it did: +12.0 +17.0 +11.0 +6.5 . A fair bit of variation but even the worst period at 6.5% doesn’t look too bad compared to mortgage interest rates.

If you look at some UK property funds you can see that Norwich Property managed slightly better performance with a lower Riskgrade, suggesting that it would be a better choice: better return, lower risk. It does have some non-property holdings, about 17% in property shares, so that would need watching if you wanted a fund with mostly real property in it.