Re: Would it be better to invest or pay down mortgage?
I'm a fan of paying off the mortgage. A guaranteed return of 6% is better than you can expect given average market returns (8%-12% MINUS taxes). It is a no headache way of getting an immediate return on your monies.
In order of priority:
1. Pay off any non tax deductible debt
2. Pay off mortgage debt
3. Invest in 401k or other tax deffered vehicle (Roth IRA etc.. - Keep in mind, I am Canadian so don't know that much about what is available in the US)
4. Invest in non-registered (no tax deffered) equities.
These 4 simple steps will minimize your risk and offer you a balanced approach to maximizing your retirement fund. Gains are always directly correlated to the amount of risk you are willing to take, the more risk you take, the higher the potential gains could be. The approach above is geared towards minimizing risks. If you are happy to take on additional risk (paired with higher rewards), there are more agressive approaches out there (including the approach of investing in the market instead of paying off your mortgage.). What I like to do in these cases is ask people if they would be willing to take a $150,000 loan, at 6% against their home (HELOC) and invest that in the market - if your answer is yes, you would borrow to invest, your risk tolerance may be geared to using that money to buy equities rather than paying off your mortgage.
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