Follow-up from a Thread from 2015 - related to mortgage/liquidity/investing

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
rated:
In 2015 - I had posted  my situation as follows: "We have a home that we paid off not too long ago. Worth probably $280K (paid $310K - 10 years ago). Looking to purchase a bigger home for our growing family. Maybe $450K. Don't have 20% as down-payment. The goal is to sell the primary home - but unsure how to get funding for the 20%. Should I apply for a HELOC on my primary home and use that ? What is the most economical way of getting the money for a down-payment and where from which lender (since I don't want to sell until I am sure I have a new place)."

​There were a lot of options discussed along with pros and cons of paying off a home, use of bridge loan, HELOC etc. I couldn't pull the trigger on any of the options and stayed put and saved up 20% to purchase a new property. We are now closing on my old property and since the mortgage was paid in full, I will be receiving around 300K. This time around I am not interested in paying off my mortgage, but instead keeping the liquidity (unless someone changes my mind). I have mostly invested in tax deferred accounts 401k, IRA etc - so this will be first time investing in a taxable account.

​So here in my real question. Is the strategy the same for a taxable account. Use a simple 3 fund portfolio, index investing, perhaps even dollar cost average (over 12 months) and let it be or should I be looking at building a dividend heavy portfolio (which can provide a monthly income of sorts). The thought process being how can I make the money work for me so that I can get a return better than my mortgage (4.125%) and any specific nuances of taxable accounts. I can afford all my payments without having to dip into any of the returns from this. Also if any specific recommendation of the institution. I use Vanguard and Fidelity.
 

Member Summary
Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

I hold some ETFs for the dividends. My Fidelity adviser recently said the value and/or dividend rates could fall as the FED actually does something like increase rates. It is very hard to find a SAFE dividend player paying your mortgage interest rate. The question then becomes can you makeup the difference with market price risk? We are at all time highs, so you are starting with a handicap.
Most dividend plays pay quarterly. A few pay at the end of each month.

Also learn about tax loss harvesting -- essentially selling investments at a loss and buying a very similar investment simultaneously. You end up with a paper loss to use against your capital gains.

mrng said:   
​So here in my real question. Is the strategy the same for a taxable account. Use a simple 3 fund portfolio, index investing, perhaps even dollar cost average (over 12 months) and let it be or should I be looking at building a dividend heavy portfolio (which can provide a monthly income of sorts). The thought process being how can I make the money work for me so that I can get a return better than my mortgage (4.125%) and any specific nuances of taxable accounts. I can afford all my payments without having to dip into any of the returns from this. Also if any specific recommendation of the institution. I use Vanguard and Fidelity.
 

If you're not an expert, I would stick to a 3 fund portfolio, and I wouldn't focus on a dividend heavy portfolio, but that's a matter of personal opinion.  Remember that a return isn't necessarily cashflow. An increase in 3 fund portfolio value is also a return. You've noted that you don't need to dip into the returns, so I'd focus on increasing the overall value of the portfolio however you do it. If there comes a time when you need to dip into the returns, then shift to a dividend strategy - then you're relying on the dividend cashflow rather than having to sell off holdings. I like the idea of dividends, but I dislike chasing dividends (if I find a good opportunity that also happens to pay a healthy dividend - super! but I won't invest in a bad opportunity just because it has a high dividend)

I use Vanguard. If you're actively going to be trading, you could consider fidelity as well (https://www.fatwallet.com/forums/finance/1556981). But you can access any mutual funds from either, so if you like one, stick with it.

FYI, I'm selling a house soon and purchasing another. I'm putting as little down as possible and will be doing what you're doing. So I won't be trying to change you mind on the liquidity topic.

Liquidity is the way to go, as you saw firsthand when having all your money tied up in your property limited your options in 2015.

And yes, for a taxable account, I think you want a simple set of cheap index funds. You should read up on fund tax efficiency and possibly adjust your choices in favor of that.

Thank you imbatman. The link that you have for the Fidelity discussion does not work.

Seems like I should stick with the 3 fund portfolio strategy.

 

I hate auto linking
delete the ). at the end that was added by FW

https://www.fatwallet.com/forums/finance/1556981

ryoung81 said:   Also learn about tax loss harvesting -- essentially selling investments at a loss and buying a very similar investment simultaneously. You end up with a paper loss to use against your capital gains.
Who has losses in this market?  Tax loss harvesting is an infomercial gimmick to get newsletter subscribers.  If you are significantly increasing your performance with tax loss harvesting, you are doing something wrong on a much larger scale.  



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017