Need some Financial advice

[holdfast]

We have a little bit of money that we had saved to pay off our Mortgage in a year or two. Its $30,000 of what was a severance pay as well as an RRSP that we had saved. This amount is 3 years of Mortgage that I had planned on throwing down next year to be Mortgage free. This was my dream and 90% reason why I left the Army and move to Saskatchewan. To be Mortgage free before I croak. Unfortunately we moved the money from a GIC to some stupid Royal Bank fund, thanks to my .... ah never mind. Anyways as of now I may have 20, 000 left and its still going down. This is not or never was a long term investment. What do I do. Im tired of arguing with my wife as she thinks that soon or later it will come Back. I say no, it wont and its getting worse. Every 10,000 we lose we add another year on our Mortgage. We are so close, but now its getting out of hand. I just need to know. Should I pull it out. I'm not trying to make money, just trying to keep money., at this rate, every 1000 I lose, I'm paying an extra 1000 to end my mortgage the way I look at it.

Edited January 29, 2009 by holdfast

[Joey]

Even tho I know how men feel about premature withdrawal, I'd pull it out now Holdfast. Put it in a savings account for awhile to earn some interest.

 

Joey

[lunkerbasshunter]

if your money is in the banks its probally the best thing long term right now. 5 years from now it will go up, if you want the money in the next year though it most likely wont show you any return at all.

 

It is a buyers market right now. the markets will go back up its just the way it goes, predicting when is the ??????

 

Hope it works out for you!

[Cookslav]

This is not or never was a long term investment

 

Get The hell out NOW!!!

I'm no financial expert but I know this...

If your not in for the long haul your never gonna make that back.

There is no sign of recovery in the next quarter, or the following...in other words the market(and your investment) is going to continue to drop or hold over the next 5 months.

 

Most experts predict it will take 3 YEARS before the market recovers....some say longer, but most agree the next 2-3 years are going to be a slow ride.

 

If your unprepared to wait a minimum 3 years...cut your losses and get out bud.

[misfish]

Unfortunately we moved the money from a GIC

Why did you do this?

GIC, is to be the safest investment. So Im told.

 

Like mentioned,savings account.Make a wee bit on the interest,but atleast you know,yer not going to lose it.

 

I might add, buy some bonds.Ya dont make much,then again,you,ll get it back plus a bit.

[workwear]

ahhhhhhhhh where is lundboy when ya need him...hell ill say it for him

 

 

 

i told ya so

Edited January 29, 2009 by workwear

[bassfighter]

Sorry to hear of your investment portfolio. Many are in the same boat as you do, and do not know what to do. Most investors are watching the market for trends. So far, there is no obvious indication of either direction.

 

No one can pedict the future or we would be rich. The market might not have bottomed out as many would agree due to too many bad news.

 

RRSP season is down the corner, it might go back up a little bit, many will have to contribute to their investment portfolio, but due to signs of more potential negative news happening, the market might go back down again, there are people who will cash in and cash out as we speak.

 

Even GIC interest is worth pennies as of now, Lock it for the 6 months short term, if you cannot handle more risk and stress about investing, and watch the market closely for uptrends.

 

The price of the oil sector is reasonably low right now, it will definetly go back up in a year or two, but due to volatility, it might go back down to under $40 per barrels again. No one can predict this. Those who have extra money to invest might agree that price of Oil is reasonable to buy with the current price and trends. If the price drops below $35 mark, the whole market might get worse.

 

By February, we are waiting for the auto industry to submit a report to show a strategy that can save the industry, if they can't find a solution, they have to return the money they borrowed , the market will surely be affected by their decision. If there is a more positive solution, our north american stock market is on its way up , and some of us might already miss out. Those who are inside traders can get news before everyone dose, are the ones that benefit from the stock market, the rest of us are just pawns.

 

Another way of being positive is, you still got some money, those who do not have money to invest might also have nothing to worry about. Life will never be perfect regardless!

 

There is a saying: If we can still sleep after we have lost our investment/money, than we have the proper gambling type of personality! For some people, burying it on the ground as of this stage might be the right thing to do. No risk might mean no worry at times! However, no risk also means no gain!

Edited January 30, 2009 by bassfighter

[Big Cliff]

Saddly, you aren't alone my friend, we found ourselves in a similar situation. So many people kept telling us "go mutual funds" do it through the bank, they are managed by professionals, you will make a lot more money than in GICs.

 

Well, we all know what happened to mutual funds! Many people have the attitude that "it is only on paper" (our losses) that you haven't really lost anything until you sell; well, I now have 30% less than I had when I started, in my books, I have lost 30% of my working capital and so have you.

 

What is the right thing to do? Well, I bailed, put my money into term deposits. I don't have a mortgage to worry about but if I did, I would sure be paying that down as fast as I could, the banks will never pay you as much for your investments as they will charge you for a loan.

 

Less mortgage = more equity in your home and you can't get a much better investment than that.

[Roy]

Well, there's not a lot I can help you with as far as investments go but I can tell you one thing. Having a mortgage free home is very nice but, don't let the dream of being mortgage free rob you and your wife of your happiness today.

 

Keep healthy, don't live above your means and you'll be a happy dude.

[Rizzo]

it all depends on when you need the money. My in-laws keep telling me to pull out now and cut my losses. I tell them they are nuts, I haven't lost a thing until I cash out. My plan is not to touch that money for at least 10 years so I'm leaving it right where it is. In fact, just invested more money into it! Great time to buy if you are able and don't need the money for at least a few years. If you can hold on for 5 years I would say leave it.

[BigSmallie]

If you got a 2 year time horizon I would leave it. The markets will recover and when everyone is panicking the most thats usually when we are at the bottom. If you sell you lock in your losses. The chance of it dropping another 30% is much less than the chance of it gaining back 30%. It was probably a bad investment decision at the time to go into the markets with a 3 year time horizon but don't make another bad decision by getting out. Average bear markets last 13 months, this one is going on 13 months now but will take a while longer to correct itself. I could go on and on.......

 

I hate to say this in public but LISTEN TO YOUR WIFE..... just once...... hope my wife doesn't read this.

[holdfast]

it all depends on when you need the money. My in-laws keep telling me to pull out now and cut my losses. I tell them they are nuts, I haven't lost a thing until I cash out. My plan is not to touch that money for at least 10 years so I'm leaving it right where it is. In fact, just invested more money into it! Great time to buy if you are able and don't need the money for at least a few years. If you can hold on for 5 years I would say leave it.

 

 

It was meant to put on my Mortgage next year. As of now, it'll be the year after at this point. So in Reality its now meant for two years because of what I have lost. Example, 40,000 left on the mortgage, we are paying the principle of 10,000 per year at 3.2% and I believe renewal is next year and we will never get it this low as we had bought it out 4 yrs ago to get this low.

[irishfield]

What Rizzo and Bigsmallie said. Pull you lose.. simple as that. I'm missing 38% of my future "life" right now and spending VERY carefully because of it. Even got Joey to buy me a meal this week! Was wrenching on my own (damn '98 GMC sierra) vehicle all day because of it instead of dropping it at a shop. Gotta start cutting $ output somewhere until things improve in the markets. Maybe there's something in there you can cut while you wait for your investments to rebound as well.

[BigSmallie]

You still have a year to wait. Hold tight and reasses at that time. With a mortgage that small if your rate is 3, 4 or 5% it won't make that big of difference in interest costs. 3% of 30,000 is $900 in interest for the whole year. 5% is $1500 for the year. Thats only a $600 difference(probably a lot less than most spend on fishing gear in a year) Even if it took 3 years to gain back the 30% you lost, that is a $10,000 gain over three years and $4500 in mortgage carrying costs for the same period(actually less because you will be paying down the debt over that period). The math says leave it where it is. This low interest rate environment isn't going to disappear quickly. I do this all the time when clients are haggling over a .10% rate difference, it you actually calculate the dollar difference it's usually not the end of the world.

Edited January 30, 2009 by BigSmallie

[Terry]

yeah but he is not long term

 

I would pull out

[holdfast]

You still have a year to wait. Hold tight and reasses at that time. With a mortgage that small if your rate is 3, 4 or 5% it won't make that big of difference in interest costs. 3% of 30,000 is $900 in interest for the whole year. 5% is $1500 for the year. Thats only a $600 difference(probably a lot less than most spend on fishing gear in a year) Even if it took 3 years to gain back the 30% you lost, that is a $10,000 gain over three years and $4500 in mortgage carrying costs for the same period(actually less because you will be paying down the debt over that period). The math says leave it where it is. This low interest rate environment is going to disappear quickly. I do this all the time when clients are haggling over a .10% rate difference, it you actually calculate the dollar difference it's usually not the end of the world.

 

I know what your saying. I believe my wife probably is thinking like you are. However for me, Ive lost 10,000 in less than a year. So now I have to stay in the Mortgage an extra year with my original plan. So now, its adding another 10,000 out of my Pocket and an extra year the Bank owning the house. I cant see the Logic unless magically I make up that lost money in the next two years. Thats not saying Im even going to lose even more the way the market is. Stimulous or no Stimulous.

 

Maybe I'm thick, but I don't see the Logic in waiting like my Wife figures

[River Rat]

I paid off my first house in 8 years (with only 5% down) and dumped money into RSP for a while.....all the rest of my money went to Gucci Shoes and whatever else my wife could buy,,,WE decided to get into a WAY bigger house so I would have a mortgage again, and something that would appreciate in value ( big bass boats traditionally lose money ) .....now my $400K house is worth like $300K and my portfolio is down at least 35%.........so I lost on both sides,

 

you only lose when you sell....this is a set back in your plan. I added 5 years to my over all finacial plan to compensate for this bump in the road. pick the right stock in the next 6 months, that 5 years could be much less.

 

If you sell, you have lost....hang on for a bit and change your plan to accomodate.

 

RR

[BigSmallie]

If you sell out now, magic or no magic you'll never make back the lost $10K and yes you will be out of pocket no matter what.

The reality is exactly as you said the 10K is lost as of right now but what is the best way to gain it back? You can either save it out of your pocket or let the investments potentially earn it back.

All indications are the we will recover from this recession as we have done many times in the past and the market will continue upwards. If you've given up all hope that is a great sign that we are at the bottom and recovery is just around the corner. These financial decisions should be about the numbers and emotion should not help you make decisions.

As Rizzo said it's a great buying opportunity. You should be borrowing $50,000 more and investing it in the market and you may have new boat in the driveway in a couple of years........

[douG]

Is it an option to make some sorta payment against your mortgage now? It sounds like getting rid of that life sucking force is very important to you. If it is, go for maximum joy - I bet that you can drop 10% of your initial principal amount every year without penalty. So, go make that annual overpayment to the max. That takes you towards your goal, and reduces your exposure with the rest of your working capital, no matter how you choose to invest the rest. You might also think about drawing down your savings by increasing your monthly or biweekly payments to the max because that also will take you towards your goal.

 

I am in a similar boat, looking at getting out from under in about 3 years. We have about a quarter year's after tax income owing on the house, and similar on the line of credit, secured by the house. Line of credit is now 2.5% below my mortgage rate, so we are going to borrow to collapse the mortgage, and will shift our liability to the lower source of credit. That will actually save $4100 for us, and we will lose our 'mortgage' about 3 months earlier. Sounding good to me.

 

Remember that your initial plan of investing cash to pay off your mortgage at some time in the future only makes sense if you are positive that your investments will make more money than what your mortgage costs you. If that is true, I would gladly pay you Tuesday for a hamburger today.

 

Good Luck to us all.

Edited January 30, 2009 by douG

[nofish4me]

Any investment that makes the wife happy, is always a good investment !

Having said that, it's all up to you.

Whatever you can go to sleep with at night (don't mean the wife) and not loose any sleep, is always the best thing.

Edited January 30, 2009 by nofish4me

[BigSmallie]

Terry, he's not long term, I agree but he made a bad choice and is down so why sell out at the bottom. I agree if it was brand new money and he needed it a year from now then keep it safe but he's not going to have enough to accomplish his goal if he sells out. If he stays invested he may have gained back 2000, 5000, 10000 by next July and he can then make the exact same decision he has today but potentially gained back some money. I'd be willing to bet the market next July will be higher than what it is today.

Selling today guarntees that he will have to pay $10K out of pocket. Do you go with the sure thing of knowing your 10K out of pocket or ride it out and potentially be out of pocket a lot less or not at all. I think that is the logic your wife is trying to follow.

Edited January 30, 2009 by BigSmallie

[BillM]

There are no losses until you pull the money out. I hate to say it, but it's true. Is being mortgage free that big of a deal? What's an extra few years? I'd sit on your investment for a good 12-18months and then see what happens. You aren't going to make anything by pulling that $$$ out and dropping it into a savings account..

 

If you pull out now, you are going to miss the upswing that the market is inevitably going to take.

[walleyemaster]

i would like to start with the words cash is king.. from what ive been hearing and seeing this market is totaly screwed..banks all over the world are on the verge of collapse and all the money governments throw at this mess is not working...we have to look at the big picture here..without the usa the world is in deep caca...lets take china with a 1.1 billion population they dont consume 1 tenth of what the usa cunsumes and the usa only has 350 million....9 out of 10 cars produced in canada go to the usa market..banks in london , scotland, italy and not to mention other banks in europe are all in deep caca....most banks are not telling the full story.....did some work for a president of one the big three banks in canada... wont mention his name or bank, but he told me something kinda scary.. he said only 2 banks in canada are solid at this point, royal bank and TD... he said the other banks including BMO are in bad shape and are still not sure how bad of shape yet..... in saying this , we cant be scared we must keep moving, me myself im in a service industry and i know that the rug could be pulled right from under me, but for now i just keep plugging away and im trying to contribute to society as much as i can...i went out a bought me a new lowrance fish finder for my boat the hds-7 knowing fully that $1200.00 could come in handy in the future. but i wanted it now and due to the fact i had some cash i bought it...which brings me back to you..take the money put it on the mortgage or somewere safe and wait...these are the times for those who have the cash to actually become rich ...very rich if in the right spot at the right time comes along...and when it does you'll have the money to do it with.... cash is king

[ch312]

i miss the days of having $30k+ in my savings account. gotta love making $120/month interest off money that i could withdraw at any time

 

you can make lump sum payments on your mortgage each year and the amount depends on the bank. im with ING direct (by far the BEST bank to deal with) and they allow you to pay off 25% of the principal each year with no penalties which is much higher than the normal banks.

 

why havent you put this money down on your mortgage already???

Edited January 30, 2009 by ch312

[douG]

That's what I said.