Shares v Mortage

coolb999

edinburgher wrote: »

Well that's super, but I'm not sure how it's at all relevant to the conversation

Well this was just generic about shares sv mortgage. With the interest rates so low for the mortgage, my view is not to pay mortgage as there is a lot more money to be made elsewhere.

Considering this topic is about £3500 only , I would just save more money or else pay off the mortgage as it's not going give to a lot more returns in shares , considering the transaction fees.

My beset choice would be to save up for a deposit to buy another property if you can and rent it out as I tend to have a lot more returns on it.

jamesd

Fryup wrote: »

Ive £3,500 sat in shares not doing anything really ... do I cash my shares in and pay this as a lump sum?

They aren't doing anything really, so why do you still own them? Do you think that they will do better in future? Would you buy the same ones today if you had the cash instead of owning those? If not, sell them and buy something else that you would buy. Maybe the Old Mutual UK Smaller Companies fund if you can handle bad year drops of 60% or more, with nice growth longer term. Don't ignore the 60% drop, you will see it occasionally, but of course you already own shares and individual shares drop by more than that, so you should already be comfortable with such drops.

The main UK stock market has historically averaged about 5% plus inflation in growth after fees, about 8-9% total. That's higher than most mortgage rates so overall it's a better choice long term for those who can handle the down parts as well as the ups. Smaller companies have grown more with larger downs as well as larger ups. Plenty of non-UK markets available as well.

SillySod wrote: »

while there is a (slim?) chance that as shares they could earn you more. Do ya feel lucky, punk?

Slim? That's the chance of losing, not winning. Here are the real historic chances that simply buying the main UK stock market with a single lump sum investment would have beaten cash, which is similar to mortgage interest rates:

10 years: 92% chance of beating cash
5 years: 80% chance of beating cash
4 years: 78% chance of beating cash
3 years: 75% chance of beating cash
2 years: 73% chance of beating cash

Source is the 56th annual edition of the Barclays Equity Gilt Study, the 2011 edition.

Looking back since 1899 there were 95 18 year periods. In 94 of those if a lump sum was invested once at the start investing beat cash (page 69 of 2012 Equity Gilt Study). Over 23 years there were no periods where the equity investing produced less than a positive result after inflation (page 68 Figure 7).

Now, most people don't do it all as one lump sum, they tend to have a regular income and reinvest that, so they get closer to the average result more quickly because they get the average across lots of individual starting dates.

You can expect investing to beat overpaying on a mortgage. You just have to be willing to accept the downs as well as the ups.