What would you do in my position?

Type_45

TheAble said:

I'd get it paid off personally because I don't like humping debt around, especially into retirement. Would probably try and do it over 5 years.

That's certainly the plan anyway.

Over the next 5 years, in normal times, I'd expect my £75k in VLS100 to be about £125k in 5 years time.

And I'd certainly pay the £70 mortgage off under those circumstances.

But who knows what the stock market will do over the next year, let alone 5 years. I may have LESS than £75k in my VLS100 this time next year if the economy goes belly up!

DireEmblem

Given your interest payments are £48 a month, work on setting up a second savings/investment account to pay off the capital, and concentrate on growing that.

Type_45

MX5huggy said:

I wouldn’t pay it off, but I would dial down the risk of your investments, if you have no other savings. Maybe LS 80 or 60 for the majority, LS 100 is not really like the other LS.

Yes, I am wondering this. I had VLS60 for a few years, and switched to VLS100 about a year ago.

Perhaps the bond allocation (even with VLS80) would be worth thinking about.

I have no plans for the money, nor do I need it (other than for mortgage repayment purposes), but perhaps VLS100 is too risky in this economy when I want to be paying off the mortgage in the next 5 years.

Steve182

Type_45 said:

MX5huggy said:

I wouldn’t pay it off, but I would dial down the risk of your investments, if you have no other savings. Maybe LS 80 or 60 for the majority, LS 100 is not really like the other LS.

Yes, I am wondering this. I had VLS60 for a few years, and switched to VLS100 about a year ago.

Perhaps the bond allocation (even with VLS80) would be worth thinking about.

I have no plans for the money, nor do I need it (other than for mortgage repayment purposes), but perhaps VLS100 is too risky in this economy when I want to be paying off the mortgage in the next 5 years.

At your age, with no plans for the money except maybe paying off an almost interest free mortgage I would remain 100% in equities.

Thrugelmir

Type_45 said:

Thrugelmir said:

I was fortunate enough to sign up to 0.35% above base in 2007.  Just repaid the mortgage quicker as interest rates fell. 

Is it worth paying it off, though, as it's free money?

But as I said above, the flip side is that if interest rates (and your mortgage payments) go up, and your investments go down, you'll wish you'd paid it off (or some of it) when you had the chance.

Markets peaked in 2007 and didn't recover to 2013.  Anybody that didn't start investing until 2009 or later. Will have a very perspective of the investment world.  There's a high level of complacency currently, reinforced by the markets reaction to Covid last year. Central Banks aren't going to remain the investors friend indefinitely. 

Having no mortgage allowed me the freedom to trade the markets last year without fear. Across my entire portfolio I returned 38% in 2020. Something I've never achieved before nor likely to again. Free money has to be grabbed with both hands while it's there. As opportunities come and go. 

JohnWinder

Your finances aren’t too complicated, and you’re familiar with their details writing this thread, but there’s value in having a written investment policy statement which sets out your ideas, aims and how you’ll try to achieve them. It can help you avoid being blown off course by events like market movements or interest rate changes that can always occur but shouldn’t mess up your strategy. 

Your house is primarily a place to live in, not an investment or collateral for borrowing. If there’s a chance you could lose your house by a tragic combination of rising interest rates, collapsing share and house prices and losing your job (or being unable to work), then it all needs a re-think.

You can’t change from owning VLS60 a year ago, be now thinking of moving back towards it, and pretend you have a well thought out approach to managing your finances, surely?  Of course, we can forgive ourselves for that sort of behaviour when further reflection or experience suggests it is the thing to do, but at some point we need to acknowledge that we’ll never know what’s going to give the best result in the future, and that we need a strategy that can withstand the inevitable market turmoils without our needing to make potentially costly changes, and that a feeling of regret is inevitable when something different would have been better (and there’ll always be something that could have been). Market timing, or interest rate or currency valuation changes reacted to for profit is beyond most of us.

Lastly, your £75k in VLS100 might get to £125k in 5 years, but that’s 11%/year growth. Vanguard are ‘projecting’ 6%/year nominal growth in equities for the next decade.

Oh, and it's questionable whether bitcoin is an investment since it earns no interest, pays no dividend, and has no intrinsic value; but even if it is, what did your policy investment statement say about such investments before you bought it? You're making an important financial contribution to helping establish what role blockchain technology has in our world, but you'll get the benefits blockchain brings without that contribution.

Type_45

The reason I can see my VLS100 £75k grow to £125k within 5 years is also because I add £5k-£10k per year to it myself. It won't only be stock market growth.

HOWEVER: this isn't factoring in a massive economic crash, which is always on the cards at the best of times, but even more so given the events of the last 15 months.

JohnWinder

Good point. 3 and a bit% growth per year should be on the cards for VLS100.

Eco_Miser

Type_45 said:

The reason I can see my VLS100 £75k grow to £125k within 5 years is also because I add £5k-£10k per year to it myself. It won't only be stock market growth.

HOWEVER: this isn't factoring in a massive economic crash, which is always on the cards at the best of times, but even more so given the events of the last 15 months.

If you are considering cashing in your investments in 5 years time (less in future years), should you be putting more into VLS100, especially if you think an economic crash is likely?

Perhaps you should be putting your new contributions into something less volatile, or maybe even in nominally safe bank or NS&I accounts, like Premium Bonds.

Apodemus

I think I would put my £75k (and top-ups) into a portfolio of Investment Trusts and apply the income to cover the interest and some capital repayment.