Which Fidelity account to park $20K until year end?
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Subject Author Date
Which Fidelity account to park $20K until year end? Ken 07-10-2008
Posted by Ken on July 10, 2008, 6:55 am
I was recently laid off of my job and received a decent severance package.
I just started a new job this week. I want to pay down my mortgage by $20K
with my severance, but I want to wait until the end of the year to see how
the new job goes. I have recently consolidated all my financial assets
with Fidelity, including a MySmart cash account for checking. I am
comfortable with my long term investment strategy, but the thought of
keeping this $20K safe from inflation and balance shrinkage until the end
of the year is giving me heartburn. I would love any suggestions that you
may have within the Fidelity family of accounts.

BTW, my mortgage interest rate is fixed rate of 6.125%. I figure that
paying down my mortgage is a safe bet in this economy. I have good
liquidity and a good chunk of money in an IRA account, so I am comfortable
paying down the mortgage once I know the new job will be stable in the long
term (it should be).



Posted by Flasherly on July 10, 2008, 9:57 am
On Jul 10, 6:55 am, k...@not4mail.com (Ken) wrote:
> I was recently laid off of my job and received a decent severance package.
> I just started a new job this week. I want to pay down my mortgage by $20K
> with my severance, but I want to wait until the end of the year to see how
> the new job goes. I have recently consolidated all my financial assets
> with Fidelity, including a MySmart cash account for checking. I am
> comfortable with my long term investment strategy, but the thought of
> keeping this $20K safe from inflation and balance shrinkage until the end
> of the year is giving me heartburn. I would love any suggestions that you
> may have within the Fidelity family of accounts.
>
> BTW, my mortgage interest rate is fixed rate of 6.125%. I figure that
> paying down my mortgage is a safe bet in this economy. I have good
> liquidity and a good chunk of money in an IRA account, so I am comfortable
> paying down the mortgage once I know the new job will be stable in the long
> term (it should be).

Some bond- and treasury-linked ETFs will do, although LT isn't typical
these days, often with 9:10 sectors off or run down by a pervasive
financial and energy interplay typical of volatility. Low expenses
among a few articles of similar consideration -
http://www.etftrends.com/category/retirement/

Posted by Andrew Koenig on July 10, 2008, 10:38 am

> BTW, my mortgage interest rate is fixed rate of 6.125%. I figure that
> paying down my mortgage is a safe bet in this economy.

You're betting that you will not be able to make 6.125% on your investments
over the expected lifetime of your mortgage, even though under normal
circumstances that would be pretty much assured. And you're willing to back
your bet with a substantial loss of liquidity.

Sounds like market timing to me.



Posted by Evojeesus on July 10, 2008, 2:41 pm

> > BTW, my mortgage interest rate is fixed rate of 6.125%. I figure that
> > paying down my mortgage is a safe bet in this economy.

> You're betting that you will not be able to make 6.125% on your investments
> over the expected lifetime of your mortgage, even though under normal
> circumstances that would be pretty much assured.

True, but aren't the "normal circumstances" you mention determined by
the recent multi-decade expansion of the most successful economy (so
far) in the world? Are there no limits to such expansion in the
future?

Posted by Andrew Koenig on July 10, 2008, 3:56 pm

> True, but aren't the "normal circumstances" you mention determined by
> the recent multi-decade expansion of the most successful economy (so
> far) in the world? Are there no limits to such expansion in the
> future?

Interesting question, and I would have to say that the answer is no. The
behavior of financial markets relative to currency value is influenced by
many things, and economic expansion, however you define it, is only one of
them.

As a simple example, consider that when I bought my house at the end of
1983, the best mortgage rate I could get was 13.375%, and bank savings
accounts were paying about 7%. I would love to have been sitting on a
6.125% mortgage then. And I don't think there was a whole lot of economic
expansion going on at that point.

More generally, I think that the USA stock market as a whole has been making
inflation plus 6%, more or less, for as long as there has been a stock
market. There have been some pretty substantial deviations from that norm,
of course, but in general they've been of short duration compared to the
term of a typical mortgage.



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