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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]
The above scenario is false. Money invested in a total market index fund immediately before the crash would have returned an average of 8% annually. That's 10 years out from the worst market hit in a century and unless you have an insane interest rate you would still have been better off putting that money in the market. Things could not  have "just as easily gone the other direction" - it's not inconceivable but past performance has shown it incredibly unlikely.[/quote]

You're looking at a ten year window (though you should be looking at 12), in hindsight.

If you'd taken two years off to pay down your debt [i]prior to[/i] the crash, you'd be in an even better position right now. You'd have avoided the investment hit, been out of debt, AND been able to enjoy the recovery. Your investment portfolio would not be quite as large, but that would be more than offset by the debt payoff.

For what it's worth, I would not count on ~8% annually. "Historical Returns" seem to mostly be based on the last 100-120 years or so, which have honestly done the U.S. a lot of favors. We've had a couple of industrial revolutions, economic growth from coal, oil, and other non-renewable resources, the rest of the world blown each other up TWICE in two world wars while leaving us relatively unscathed, we've been the leaders in the tech sector for the last few decades, and we enjoyed high population growth for most of that time.

That is not the normal course for human history.

Think about it this way: If your great-great-great-great grandfather had invested $1 in 1776, at 8% annual returns that would be about 125 million dollars today. Does that seem reasonable to you? By inflation, that should be around $30.[/quote]

I don't understand your point. Money invested in the market 12 years ago would have yielded a 9% annual return. So you do not want it going to your debt. You want it in the market. Studies going back to the 1600s show 5% real returns as the norm. I certainly conceded that it's not guaranteed, but all of history is on your side. [/quote]

If your debt costs you more than what the market returns, then you need to get rid of the debt. Meaning, if the interest you are paying is more than the historical average of 8-9% market returns, then you need to pay off your debt. I don't understand why you are arguing against this. [b]And during the downtown, the market was definitely NOT returning 8-9%. My portfoli remained stagnant for years and some even lost money. It definitely made sense to pay down debt in that scenario[/b], and people who had paid off debt prior to the recession were in much stronger financial positions to weather that recession than the people with loads of debt who had tried (and failed) to time the markets (especially the real estate market!).

I used Dave Ramsey's approach after I left grad school. I paid off $20k of credit card debt in 1.5 years, and now 13 years later have never gotten back into that kind of trouble. I don't like debt, and feel freedom not being bound to it. It was life changing.[/quote]

hot tip: That was a time where it was good to be putting money in the market, not paying off debt.[/quote]

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