Reply to If paying off your mortgage is dumb, why do so many rich people do it?

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Reply to "If paying off your mortgage is dumb, why do so many rich people do it?"

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[quote=Anonymous][quote=Anonymous]I think the point is that if you're rich enough, it's not an either / or. You have a paid off house AND a ton of money in the market. I mean in theory you could keep a mortgage and make more in the market on the margins, but if it's only a tiny percentage of your net worth, it doesn't hurt to diversify.

I'm trying to figure out this balance myself. We want to upgrade our house and I think we could pay for it in cash, but it would be a huge chunk of our net worth and so that feels risky. So I want to take out a mortgage, but I don't know how much. The point is, though, that I'm not the super super wealthy. Deciding how to optimize $1 mil means a LOT to me. To someone else, it might just be a fraction of their portfolio. [/quote]

Exactly!  For many of us (worth $40M+) we see no need to have a mortgage.  If your $10M in houses is only 20% of your total NW, there is no need to "invest more to make more money".  We don't need any more to fund the lifestyle we desire.  Right now we can make more off the part in CD/MM than we would need in a year--right now we are getting about 2x what we might spend on the high end (and that includes buying new cars, traveling 2-3 months of the year, traveling business/first, nice hotels, 5 star restaurants, living the good life, etc).  Given that we are still working bringing in more than that amount, we are content just earning 5%+ in CDs on a good portion and preserving the capital while earning a guarnateed good rate, and having about 40% in the market to capture the market upswings (and downswings). At some point, you simply don't need more money and preserving a portion of your capital is more worthwhile [/quote]

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