Recession Looming - so pay off mortgage instead of investing?

DoctorStrange

Its the ASI UK Equity Unconstrained Fund, so I knew it was gonna be a volatile ride, but the last 12 months have caused me reconsider my risk appetite

DiggerUK

You are assessing that economic problems seem likely. Put your own level of risk at how bad they look, and the likely consequences. I am with you about the poor outlook.

Given you are still of that opinion I would suggest you consider the probable ups or downs of any investments. Is it worth the risk?

If you go with reducing your mortgage debt, you reduce outgoings. Is that a risk you are happy with, or not. I would say that a greater protection of the roof over your head, and securing what you have already paid should be a bigger priority.

It has been pointed out by Thrugelmir that people lose their regular income every day. I will add that people have to suffer reduced incomes every day as well.
Best of fortune..._

Linton

You do not know when recessions and market crashes will happen. On average, acting on predictions is likely to lose you more in lost opportunities than you gain in disasters averted. So you need to configure your finances so that in the long term you make good returns whereas in the short term you are not wiped out, no matter what happens somewhat short of global armaggedon. In particular...


1) As a freelance you are running the risk of not finding another contract which is probably higher than most peoples risk of losing their job. Therefore your first priority is a rainy day fund sufficient to remove short term worries. Perhaps it should last a year or even two - you would be a better judge of a reasonable worst case scenario than I am.
2) Anything beyond the rainy day fund you should be prudently thinking long term. Invest broadly mainly in equities rather than chase maximum returns from niche investments You dont know what will produce maximum returns and what will fail disatrously but by investing broadly you get some net gain from whoever wins.


A decision of mortgage vs investments is a long term one - in the long term which is better. In my view that is investments which on average should perform much better than 1.7%. OK it may turn out wrong but if you make a series of such decisions overall you would expect to gain. Because of your rainy day fund you can afford to take the risk.

DoctorStrange

I think all in all I'm just going to pay off the the mortgage. Looking at everything again has confirmed to me that I'm not willing to take much more risks outside of my pension, and being 100% debt free is more appealing to me right now than trying to gain a few extra thousands beating the interest rate.

Thanks everyone

Alexland

Ok its your choice but it seems you are bouncing between a high risk loss making fund and low risk mortgage repayment when something in the middle could be more tax efficient and give a better long term return. Still worth keeping enough in cash for a rainy day (or season).

Audaxer

DoctorStrange wrote: »

One of my pension funds is down 20% YTD which, although I know isn't really relevant

If it really is 20% down for the first 7 months of this year, you really need to investigate what investments your pension holds. A medium risk portfolio such as Vanguard LifeStrategy 60 is up over 14% for the same period, so I am surprised that any pension fund is showing any sort of loss this year.

SonOf

DoctorStrange wrote: »

Its the ASI UK Equity Unconstrained Fund, so I knew it was gonna be a volatile ride, but the last 12 months have caused me reconsider my risk appetite

That fund is heavily affected by Brexit. Its a high risk fund and one designed to be invested in with only a small percentage of your portfolio (maybe no more than a 5-10%). Not something anyone should be going into with 100%. That would be very bad investing if you did that.

Recessions do not mean the markets will decline. There have been plenty of recessions where investments have carried on rising. And there have been periods when markets have crashed when the economy is growing.

Linton

DoctorStrange wrote: »

Its the ASI UK Equity Unconstrained Fund, so I knew it was gonna be a volatile ride, but the last 12 months have caused me reconsider my risk appetite

Wow!! I cant see how that would turn up on anyones searches. To quote its objectives as given by Trustnet:

Due to the unconstrained nature of the fund investors must be willing to accept a relatively high degree of stock specific risk.

I honestly cant see that your experience with this fund tells you very much about anything other than dont do it again. What's wrong with normal funds?

For anyone else trying to find it - its a Standard Life fund which invests in UK Companies like house builders and Provident Financial.

edgex

If you can pay off the mortgage, do so.
Not only will it be one less regular payment to cover if your not earning, but it will also reduce the amount of funds required for emergency savings, freeing up funds for other savings/investment.

Bravepants

My partner and I paid off our mortgage a few years ago, best thing we ever did in terms of having one less thing to worry about! Freed up money for investing, or buying extra pension provision.