Deciding whether to invest extra cash or pay down your mortgage is a common question for many. Here’s a simplified breakdown to help you weigh your options:
- Investing Often Outperforms Paying Off the Mortgage Over the short and medium term, investing (using debt recycling) generally yields better results. Over the long term, it outperforms in all scenarios.
- Market Volatility Matters Poor timing (e.g., starting in challenging years like 1990 or 2008) can lead to initial losses, but long-term results remain positive.
- Drip-Feeding Investments Can Help Using a "dollar-cost averaging" approach—investing small amounts regularly—can reduce the impact of market volatility and improve outcomes.
- Commitment is Key If you choose to invest, stay consistent. Switching strategies after a poor start can hurt long-term gains.
- Investing vs Mortgage: A Balanced Strategy Works Too You don’t have to choose one path. For instance, if you have $100,000, consider debt recycling $75,000 while keeping $25,000 in your offset account.
- A Calculated Risk Deciding whether to invest with a mortgage means weighing risks against rewards. As for debt recycling afterwards, the answer is almost always yes. It’s like riding a motorbike—once you’ve decided to ride, wearing a helmet is an obvious choice.
Investing can be a powerful strategy, but it’s not one-size-fits-all. The right approach depends on your financial goals, risk tolerance, and long-term plans. Speak to the experts at Oreana Private Wealth today to craft a strategy tailored to you. Let’s build your future with confidence!
