Mr. Math and paying off your mortgage

[Wise Virgin]

I think we need a few eyeball puns to lighten things up.

[boarder42]

I think we need a few eyeball puns to lighten things up.

i like to consider myself an eyeball descratcher. 

[Scortius]

For gosh sakes, stop trying to argue.  There is no side to debate.

Paying off debt has lower expected returns, but greater certainty and reduced volatility.

Investing has higher volatility of possible outcomes and also higher expected returns.

Insisting that someone knows the ideal asset allocation for the future for everyone is preposterous.

Trying to be diplomatic here.  I think one of the reasons we've spun our wheels so much on this part of the debate is that people are defining risk differently.  Higher volatility does increase risk some, but higher returns decreases risk (if we're talking risk of ruin at least).  Thus, investing in a more volatile but higher expectation product can actually reduce risk in some circumstances.  This is true for me as I'm still early in the process and working on accumulation.  This would not be true for people like you, Blue House, or EnjoyIt who are at the end of your accumulation stage and are close to having 'enough'.  For me, paying off the mortgage early would be incredibly risky, and what I see is that a lot posters come in who are also early in the accumulation stage and plan on or are told to kill off their mortgage as fast as possible, when generally they should be doing the opposite, both for higher returns and for lower risk.

[Scortius]

and i've said this many times but i think it gets overlooked i'm fine with those like blue house who choose to pay down their mortgage understanding everything.  The problem i have is that in a general sense mortgage paydown should be in the same bucket as hiring a lawn mower.  Sure once you understand what your lawn mower costs you go ahead hire one ... but the default answer for 90% of cases here should be dont pay it down.

hell even Dicey one of the large supporters of invest vs paydown owns her house.  but it was a choice they made understanding everything.  I own a boat and i dont tell others hey you should go get one too its the best way to enjoy your life on the way to and in FIRE - nothing feels better spending a sunny day on the lake boarding a surfing. I tell most new comers the exact opposite.  sell the boat.

The problem that I have is that this advice is offered to "90% of the cases here" without a detailed explanation of the actual risks that are involved.  It is not fair to give the advice to people to invest with leveraged money without also pointing out that there is some risk in the event of a downturn.   When you summarily dismiss the points that others repeatedly try to make, you lose credibility.

It's not that people care whether or not "you are fine with people like blue house who choose to pay down their house", it is that you refuse to acknowledge that risks or other considerations exist.  You state that you are okay with people making the decision to pay down their house if they "understand everything."  However, you do not seem to want people to "understand everything" in making the decision to invest rather than pay off a mortgage.

I think your advice is sound in principle, however, other people's concerns or situations are not "extreme" or "unlikely" or "anecdotal".  If your goal is to educate people, then they need to be able to consider all aspects of their decision.

most of them are extreme and unlikely based on history if you want to what if you can what if yourself into never quitting.

Extreme and unlikely?

In Franks situation, using nominal returns (your preferred metric), and assuming only half of his gains are ever taxed, after 3 years; in 34 out of 116 cycles Frank would have a lower net worth if he invested instead of paid extra on the mortgage. That's 30%! If Vanguard is accurate in their projection that the next 10 years will be worse than the market average, then going forward his odds of under performance over the next 3 years is over 30%.

If we run the simulation with 10-year bonds, his net worth was lower in 58% of the cycles.

If we're looking at 3 year or 10 year horizons, you should definitely be diversifying beyond pure equities.  Most discussions here are dealing with 30 year horizons or longer.  Even if you're 5 years from early retirement, you're still looking at 30, 40, or 50 years where you're depending on those gains, so your horizon is still quite long.