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Mortgage vs Shares - an analysis a year later

July 28th, 2009 at 09:29 pm

A year ago, when the share market was sliding down and our mortgage interest rate was being reduce month after month, DH and I decide to stop putting extra money into the mortgage and start buying individual shares instead. So, 12 months ago I opened a trading account with a low cost online brokerage fee. It's under my name for tax purposes.

Well it has been a year and I thought I should analyse the result so far. Our mortgage interest rate at the moment is at around 5.5% (for some reason I can't find the latest statement, I don't know where DH put it - found it and its actually 5.04%). Overall, I end up buying 5 different stocks, some of which I average in and some was bought because the company did capital raising scheme and some was also increase because of DRP. The last shares I bought was back in early May. I just check the account and it is currently up 27%, not including about ~$100 cash (some of our stocks don't do DRP) received in dividends.

So overall, it was a pretty good decision in our part to divert cash to equity instead of paying extra to the mortgage. The year or so before that when our mortgage was almost 9% (and when the share market was too expensive for us), we put as much money into it. And we will probably start doing that again when the interest rate start going up again, there's been some talk of interest rate going up in the media already.

NB: We are very aware that this "decision" could have gone the opposite way too. And who knows what the market will do tomorrow or next month.

*Here in Australia the situation is a bit different to that in the US.*

4 Responses to “Mortgage vs Shares - an analysis a year later”

  1. gamecock43 Says:

    I am very impressed. I am impressed you were diligent enough to see the trends, you were brave enough to try this tactic, and you were disciplined enough to see it through. I don't have your skills, I will keep paying down my mortgage.

  2. shiela Says:

    No harm in doing that at all gamecock. In the end it will still increase your net worth.

  3. whitestripe Says:

    thats great! i was thinking about buying shares about a year and a half ago, but i was too scared lol!

    i'm thinking of fixing our interest rate for atleast a portion of our mortgage. at the moment our variable is 5.21% and the fixed rate is 6.49% for a five year fixed period.
    are you thinking of fixing any time soon? or does your loan not offer that?

  4. shiela Says:

    Hi whitestripe,
    Yeah we have been talking about fixing our rate for over a month now but we haven't looked into it at all yet. We really need to talk to our bank. At the moment we are just waiting and see. Next Tuesday's RBA decision should be interesting though.
    Our interest rate at the moment is actually 5.04%, just found the latest statement. I'm not sure what the fixed rate for our mortgage is, it would probably be similar to yours. So in knowing that DH probably won't want to make a move just yet. Right now it's a waiting game.

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