1) Emergency fund. 3-6 months of living expenses in case of job loss, sickness, home damage, etc.
2) 401k - contribute at least enough to max out company match. Hard to beat risk-free return.
3) Roth IRA - Wish this existed when I was in my 20s.
4) Pay some extra each month on mortgage. Make sure it is noted as extra principal.
5) Invest each month in index funds at Vanguard or Fidelity. You're fairly young to focus just on dividends. Buy the entire market instead, and don't worry about timing.
A mortgage at 4% is great. I would be reluctant to pay it off early. After inflation you are paying about a 2% real interest rate. That does not take into account any tax benefit you receive.
I am about 75% invested in 10 individual companies currently. Your comment tha the market is high is relative. It is certainly higher than it was in 2008 and 2009. Which means that the return (loss) going forward will likely be less (more) than it was the past five years. Where it ends this year nobody knows. The economy is still chugging along at its steady but modest pace. If this continues the stock market certainly could continue to rise.
The best time to invest is when it is really painful. When it looked like the financial system was on the verge of collapse happened to be one of those painful times. When it is easy to invest you returns are likely to be muted.
There are still some companies selling at agreeable prices, but they are much harder to find than they were 5 years ago. CTO is an example of one company that is still selling cheap.
I would certainly encourage you to open an brokerage account and to begin to fund it. You can always park your money in a short term govt bond fund or a TIPS bond fund. That way you will have the cash available when you spot a bargain or when the market next gets a 15% haircut.
To pay off your mortgage may give you a guaranteed return of 4% less any tax benefit and certainly be safe. I personally would look to protect my liquidity and maximize my future ability to invest. If you funnel all of you excess cash into your mortgage and the market plunges you will not have the cash available to take advantage of it.
That is how I would frame the question and how I would personally respond if I were in your situation. Keep the mortgage, open a brokerage account and start building up your funds to invest when the opportunity presents itself. If nothing good comes along in the next three or five years you still have the cash you have saved and then have a ton of opportunities. You could then pay off your mortgage ore buy a rental property or whatever is cheap at the time. Good Luck.
Pay off your mortgage and look for specific stocks that are selling at great prices. Market is somewhat high now. Just my opinion so use your own research and judgment.
I would probably put 80% towards the mortgage if you haven't had it long. Look at bbt.com mortgage calculators at http://www.bbt.com/bbtapps/LeadFusion/Lo... once you enter your amounts look at the tables section. Then look at the Cumulative interest paid. You will be shocked at how much interest you will pay if you don't pay down early.
Im in my early 20s...I would like to start building an investment portfolio (mainly high dividend stocks), but I am having trouble pulling the trigger (as the market seems really high).
Would it be smarter to focus on paying off my mortgage instead and wait until the market starts to correct or crash?
The market seems strong, but I dont see how this can keep on lasting. I want to hold this stocks (if/when i do buy) long term..so i dont want to be looking 5 - 10 years from now and saying why did i get in at the top
Any advice?
