Rich Carreiro <rlcarr[at]animato.arlington.ma.us> wrote in message news:<u1xjbs52x.fsf[at]animato.arlington.ma.us> ...
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OOPS $16,000 lost added one zero, my bad.

noreplysoccer[at]hotmail.com (Jim) writes:

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What money market that you've heard of
yields 10%? I think we all want to
know about that one.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

"Jim" <noreplysoccer[at]hotmail.com> wrote in message
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Where are you getting 10% on a money market account?

Elizabeth Richardson

paddywestpalm[at]yahoo.com (Paddy) wrote in message news:<e2d1051c.0407130548.7173070e[at]posting.google.com> ...
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2,000,000 * 80%= 1,600,000 in money market. This **probably** yields
around $160,000 per year in cash.

What do you do with this cash? Is this for living expenses,
reinvestment or other?

consider a mortage and pay off with the interest of the money market.

why is portfolio so cash heavy?
why do you feel the need for stock investments?
with all that money, how come you asked for free advice?

best of luck to you.

Paddy <paddywestpalm[at]yahoo.com> wrote:

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Bear in mind that you will still have $300,000 in real estate, even if
you use a mortgage. Your equity will be smaller, but your exposure to
the asset will be the *same*. Price fluctuations will be on the 300K,
and you will experience *all* of them, not share them with the bank.

That said, I would not use a mortgage, unless you have someplace to put
the money that you expect to earn more (after tax) than the mortgage
interest costs you (after tax). Since you are unlikely to do that
without taking on significant volatility or default risk, and your
current portfolio (if that's really all your assets) indicates a very
low volatility risk tolerance, a mortgage would seem to be a bad idea.

Getting some of that cash into something besides cash is a *very* good
idea. Money market funds will never do more than keep up with
inflation, and generally don't even do that. The only reason to keep
that much cash on hand, is if you require maximum flexibility. Do you
have a business or other large private asset that you haven't mentioned?
If so, your cash heaviness outside might be reasonable, depending on
your total situation. Otherwise, there's no reason to keep that much in
a money market, even if you're drawing on it now. A roughly 50-50 mix
of equity and fixed income (with half of the fixed portion in laddered
medium term investments (2-5 years), will give you a *much* better
inflation hedge, and some room for growth, without exposing you to all
that much more total risk.


Michael

paddywestpalm[at]yahoo.com (Paddy) writes:

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Leverage does you no good if the rate of return on
the leveraged investment is less than the rate you
are paying to borrow the money.

If you borrow against the house (ie. take out a mortgage)
and put the resulting invesment into the money market, you
are paying, say, 6% in order to invest the cash at 1%.
That's a losing proposition in both the short and long term.

If you borrow against the house at 6% and put the money
into, say, a diversifed portfolio of stocks, then in the
short run, you may get pounded if the stocks tank, but
history suggests that in the long run (ie. 20 years or
more), that portfolio of stocks will likely return more
than 6% and you come out ahead.

Frankly, in my opinion, since you're risk-averse enough
that you are keeping 1.6 million bucks in cash, you
are probably best off avoiding the mortgage. You're
still leaving a huge heap of money in cash (after
buying the condo, you'll be 20% stocks, 15% house and
65% cash) - a fairly conservative portfolio. In fact,
it might be considered a dangerously conservative
portfolio - all that cash is actually _losing_ ground
against inflation and taxes.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
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This is certainly NOT my field of expertise, however, I would
like to point out something. Regardless of the so-called
leverage that you might get with a mortgage, you would still be
required to pay interest.
I would suggest that you make a comparison of the LOSS of
earned income on the $330K vs. the leverage ! ! ! ! ! ! !

Cal Lester CLU

Paddy <paddywestpalm[at]yahoo.com> wrote:

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Your mix is cash heavy. A 50-50 ratio would be better.

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Buy the house with your cash to save on incidental expenses. But, be
sure to get an independent appraisal.

--
Ron

Hi,

I would appreciate ur responses to my question.

We have 2 million dollars (80% in money market fund and 20% in mutual
funds and individual stocks). We have been having this portfolio mix
for over 4 years now.

I am thinking of buying a condo ($250,000 to $300,000) in the near
future. We do not have any other home.
Should I diversify my portfolio by buying the house with 100% cash
(moving 15% of my wealth ($300,000) into real estate)
or
should I get a mortgage?

I realize the advantages and disadvantages of a leverage with the
mortgage. Any suggestions would be appreciated.

Paddy