Maybe this was asked somewhere on pages 1-60, but do any of you in the DPYM secret society set aside your mortgage balance in relatively low-risk investments in order to both earn a higher yield than the mortgage and simultaneously avoid Sequence of Returns Risk (SORR) at the same time?
Example: I owe about $108k on my house, at 3.25%. Relatively low-volatility preferred stock funds like PGF yield 4.8%. I could keep $108k in PGF and $-108k on my mortgage and arbitrage the 1.55% difference for $1,674 per year.
Of course, the arbitrage game is getting harder as yields compress across the duration and risk curves, so I suspect most of you are putting it all in VTI/VTSAX. But because the mortgage payment increases one's monthly withdraw from stocks, it makes SORR from a 2-5 year -50% bear market a bigger concern. Do you dial down the AA risk in exchange for holding the mortgage, and how does that work as the available yields from bond funds drop?
VCIT yields 2.27%, which is less than my mortgage, AND it has significant risk when rates increase next year. So if that was my risk tolerance, I'd prefer to pay off my mortgage. I could go out on a limb with junk bonds - JNK yields 4.47% - but is the additional risk really worth the 1.22% spread over an absolutely risk-free investment? IDK. How do you approach this?
