IrwinM.Fletcher wrote: XxSpyKEx wrote:
Anonymous User wrote:At this point I have a similar debt load and if I receive a bonus I'm sinking the whole thing into my loans. Sure, you could get a better return than 4.3% but how much better?
Depends. Stocks have netted some SERIOUS gains the past couple years (like 6-8 times your 4.3% interest rate in 2013, depending on where you invested). But it's probably safe to say that you missed that boat; I highly doubt 2015 will post double digit returns. I'd be surprised if you didn't do better than 4.3% , though (unless you're retarded and invest in bonds or something stupid like that)
Down years happen in secular bull markets though, and we're def entering the dumb-money-is-chasing phase of this one. The yardstick is also more like 6% pre-tax.
I don't think there's a wrong answer to paying down low-interest debt or investing but I also think telling inexperienced investors they can expect superior returns might not be great advice.
In what world is exceeding 4.3% "superior returns"? Average inflation across the past 30 years has been at 3%, so 4.3% is 1.3% above the average inflation rate (which isn't say that we're actually going to see 3% inflation next year). If an inflation adjusted return of 1.3% is a "superior return" in your portfolio, you should really
consider rebalancing that portfolio.
EDIT- my previous post was intended to suggest that the anon poster should invest the money, but just giving him an idea of "how much better" than 4.3% he could see in a really good year (like 2013). It's obviously all a pretty personal decision depending on adverseness to risk, long-term career goals, etc.