27 Feb 2020
Ming feng: asset allocation
I would pay "little" and i think it is practical to drag out loan over time. The answer is obvious, I am seeing there is a gap which i can gain.
Interests rate = 1.88% for housing loan
Investment return = 3-5% for a reatively conservative
Instead of paying my loan, I will drag as long as the economy on my side. Monitoring every quarterly closely should be more than sufficient, rates wont go up overnight unless there is a crisis.
There will be risks involved in this approach, but to leverage the "gap", yes it is worth it for me and many others.
There are good loans and bad loans.
Good loans are those that even a high interest savings account can potentially beat the interest rates (anything that is 2.6% and below). You should stretch your dollar to invest those monies (as long as you can afford the cashflow for 1 year).
Bad loans are those that is above 4% p.a. this is because, even CPF SA (risk free) cannot beat it. Unless you are able to beat the interest, it does not justify to take that risk.
Debt/loan should always be get rid of ASAP. liability is not a pleasing word....
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