22-07-2013, 09:23 AM
“My best idea isn't even related to ETFs. I think you should look into taking out a 30-year fixed-rate mortgage and buying property (at a reasonable price, of course). Warren Buffett says the dumbest investment right now is the long-term government bond. If that's the case, then the smartest investment is shorting it--borrowing lots of money at a fixed-rate for a long time. I first urged subscribers buy a house back in December, assuming the need and ability to do so without overextending one's balance sheet. My advice still stands.
A 30-year fixed-rate mortgage has several appealing qualities. First, after expected inflation and the mortgage-interest tax subsidy, the expected real interest rate on the loan is close to zero and may even be negative. Second, it's a natural inflation hedge and to a lesser extent a hedge against rising real interest rates. Third, it's not callable. There's no need to stump up a ton of cash at a moment's notice (usually the worst time possible) to satisfy a lender's margin calls. In this respect, it's a lot safer than traditional forms of leverage, because you can ride out mark-to-market losses without having to liquidate assets at fire sale prices.
If you already have a mortgage, take your sweet time paying it off. If you have young-adult children with decent credit and stable jobs, and you intend to leave a bequest, help them with a home down payment instead. And whatever you do, please don't extend Uncle Sam too many fixed-rate loans.”
Unquote:-
Can the advice be applied in Singapore? Can we still leverage to 30 years fixed rate for housing loans? Are there really advantages? What about the disadvantages?
A 30-year fixed-rate mortgage has several appealing qualities. First, after expected inflation and the mortgage-interest tax subsidy, the expected real interest rate on the loan is close to zero and may even be negative. Second, it's a natural inflation hedge and to a lesser extent a hedge against rising real interest rates. Third, it's not callable. There's no need to stump up a ton of cash at a moment's notice (usually the worst time possible) to satisfy a lender's margin calls. In this respect, it's a lot safer than traditional forms of leverage, because you can ride out mark-to-market losses without having to liquidate assets at fire sale prices.
If you already have a mortgage, take your sweet time paying it off. If you have young-adult children with decent credit and stable jobs, and you intend to leave a bequest, help them with a home down payment instead. And whatever you do, please don't extend Uncle Sam too many fixed-rate loans.”
Unquote:-
Can the advice be applied in Singapore? Can we still leverage to 30 years fixed rate for housing loans? Are there really advantages? What about the disadvantages?