Gauging My Audience

I appreciate your feedback! I look forward to writing about these topics!

Hi Kelsie,

Thank you for the feedback!

In regards to bonds, they can be a less riskier asset to invest in; it just depends on the bonds you buy. Treasury bonds, which are backed by the United States have a lower yield than a corporate bond who might go out of business. The higher the return on the bond (yield), the riskier the asset tends to be. Also, Bond yields tend to depend on the interest rate set by the federal reserve. If the central bank decreases the interest rate, the higher the prices are of the bond, however, the yield of the bond falls as well and vice versa. So right now, the yield on the bonds are lower because the central bank of the United States cut interest rate to between 0%-0.25%. Investors, as of now, are moving toward equities (stocks) because there is a higher yield in that market. Now, I am not a professional to tell you that you should invest or shouldn’t invest in bonds but some of the books that I have read (The Intelligent Investor) said that at a minimum you should have 25% of your portfolio in bonds and the rest in stock and as you progress through life, you slowly switch to 75% in bonds and the rest in stocks, but the book was written in the 1930s where bonds had a greater yield than they do today. Index funds offer great investments and have the power of compounding over time, especially when dividends are reinvested and when you invest in the fund periodically. Additionally, the longer you hold your index fund, the less riskier it becomes because you are able to go through the ups and downs. The reason why people invest in bonds is to safe guard their initial investment and get a interest from it. Index funds offer appreciation, which means your investment could grow in value beyond the money you initially put and you get dividends from the index fund, which is basically cash payments made to you for owning it. I prefer this over bonds, which may be right or wrong in people’s eyes, but it works well for me which is all that matters. Now, if you wanted to invest in bonds, you can invest in a bond etf, which is basically an index fund but instead of stock, it’s bonds.

For paying your mortgage early, that is a preference to be honest. I wouldn’t want to pay off my mortgage early at first because that means putting more money in the house and then leaving less to invest. I would rather invest the money into assets that will give me more money and then use that money to reinvest into more assets. I would keep the cycle going until you are comfortable with the returns and until the returns greatly exceeds your monthly expenses. Once that happens, you can then use that to pay the mortgage off early. Houses that you own and live in, in my opinion and the opinion of other prominent investors, are liabilities rather than assets. Assets bring you monetary returns. Your house isn’t doing that but rather costing you money but obviously you need somewhere to live. I would first invest money until it brings you constant cashflow from different income sources and then you can think about paying off the mortgage early, but that is my preference. Some people want the piece of mind of having their house paid off early, which is totally fine. The point is to be happy in life and if paying off the mortgage brings you that, then by all means go ahead. To do so, you could do a 30- year mortgage and keep paying extra towards principal. Another way is to do a 15 year mortgage since these you would have lower interest rates, which means less interest you would be paying but they have higher payments. Make sure that you will be able to afford the 15 year mortgage monthly payments though. Those are traditional ways you could pay off the mortgage early. Another thing you could do is live in the house and then rent of unused rooms to help pay the mortgage. I hope this helps!