@msf - I was way off in my last post. I failed to take into account that mcmarcasco would still have 100% of his loan (the leveraged amount) left after 10 years. So by applying all of that toward the balance, his gains over the 10 years it was invested would need to be only enough to cover the accrued interest - which shouldn’t be hard in a strong equity market. All boils down to what the markets do.

I read it as:
$150,000 balance [remaining on the 30 year mortgage]
$1,500 (P&I and a little extra for about a 10-year payoff)
(I also cheated and checked with an amortization calculator to see that a $150K balance at @4% can be paid off in ten years with a little more than $1500/mo.)

@mcmarasco said: “ ... whether to pay off a fairly new 30-year (4% fixed) mortgage ...”
@msf said: “Either way, At the end of 10 years you'll have your home free and clear”
What am I missing here?
Admittedly, I struggled to get a C in high school Algebra half century ago (my last math class).
I can see how paying off a longer duration mortgage (let’s assume with 25-years remaining) in only 10 years might work if one invested that loan (ie the leveraged sum) in a strong equity market and than rolled all that plus market gains into paying off the mortgage with 15 years remaining after just 10 years.
Might make a good plot for a new Disney production. :)

@mcmarasco,
I just wanted to add two other considerations, inflation and the change in interest rates over time (the time frame of your loan more specifically), to this conversation regarding paying off a mortgage with savings.
Both real estate and the stock market are impacted by these two factors over time. With a home mortgage you are locking in an interest rate that will not fluctuate over the next 10-30 years (your term). That seems like a good thing. Over that time frame the markets and interest rates will certainly fluctuate.
Inflation will typically rise over that time frame, but your housing costs remain fixed. If inflation rises substantially, your fixed cost mortgage payment is actually lower on an inflation adjusted basis. Your $150K exposure to the markets over those 10-30 years should be a good inflation hedge as well...historically speaking.
At some point interest rates should also rise. Rising interest rates often put downward pressure on real assets (both your home and your investments) in the short term, but less so in the long term.
The two paths laid out by @msf seem significant enough to consider path 1 over path 2.

@mcmarasco ISTM you're overthinking this.
The 30,000 foot view: What your are considering (investing the $150K) is a form of leveraged investment. It's as if you started with nothing in your pocket and your home paid off, and then you borrowed at 4% (the mortgage) to invest the borrowed $150K at 7%.
That's a net gain of 3% (less after taxes), but as with most leveraging, increased risk. (This also addresses @davidrmoran's question: what happens if you reduce the assumed rate of return.)
A little more detail: You want to compare two outcomes. The inputs are the same either way are: $150K cash and a 10 year cash flow of $1500/mo. Either way, at the end of 10 years, you'll have your home free and clear. So the only difference between the two paths you suggested is the value of your investment at the end of 10 years.
Path 1: Invest the $150K @7% rate of return. As you noted, you'll have $300K at the end. (You'll also have paid $180K over the ten years to reduce your mortgage debt by $150K, so you'll have paid in $30K in interest.)
Path 2: Invest $1500/mo @7% rate of return. At the end of 10 years, with incremental investments, you'll have about $258K. A lesser result.
Taxes are where one gets into the weeds:
Path 1: The net income of $150K will presumably be taxed at cap gains rate. But you'll also be able to deduct the $30K in interest against ordinary income. We'll assume a 22% rate here.
Your net taxes will be around 15% x $150K - 22% x $30K = $22.5K - $6.6K, or about $16K.
Your total after tax value will be around $300K - $16K = $284K.
Path 2: Your net income is $258K - $180K (the cash flow it cost you) = $78K. Again assuming this is all cap gains, the tax is 15% x $78K or about $12K.
Your total after tax value will be around $258K - $12K = $246k.
[The $258K result came from using a calculator and investing $1500/mo at 7% annual compounding for ten years.]

@mcmarasco - acknowledging that the financial (cash flow?) situation will be different for everyone I chose to pay additional principal when I could to cut down the term. Why? You could call my chosen profession (carpenter) seasonal at best with a ride of great years and the not so great resembling a roller coaster. A steady savings account was not possible because of those down years using up the overflow from the good years. Over the 30-yr, $140K, initial 8.25% mortgage I was able to buy two better (read: reliable) vehicles while each time refinancing my original mortgage to include funds to pay off the vehicles which were at much higher loan rates. By year 10 I was looking at two newer vehicles and a now 15-yr, $115K mortgage at 4.35% which I disposed of in 10 years.
I hate owing anybody anything so the whole point of my exercise was to be fully aware of my fluctuating income while not falling behind on my debts. By including my trucks into my mortgage payment I saved on the interest for those loans while also taking the worry of 2 monthly payments off my mind. When there was excess cash it went toward the principal. If your income is more reliable and consistent I guess you have more leeway to play. I absolutely wanted no mortgage debt in retirement.

@mcmarasco - Excellent summation of trade-offs. I wrestle a bit with this, though my numbers are substantially smaller than yours (duration, payments, rate, balance). Perhaps lacking in your depiction is the type of vehicle (non-retirement, IRA, Roth, etc.) the assets that would be used are currently invested in, as tax considerations enter the picture.
Putting all that aside (largely irrelevant to me), the one question I’d ask (rhetorically) is: *How much confidence do you have that your investments won’t sustain a substantial loss (greater than 20%) over the next decade?
Locking up your money in that contemplated mortgage payoff strikes me as similar to purchasing an AAA rated bond earning 4% (compounded monthly) over the remaining years on the mortgage. (A partial pay down would reduce the duration by X number of years.) And 4% compounded is a very nice rate on AAA debt by today’s standards. So as a defensive strategy to protect / hedge against a severe portfolio loss it makes sense.
When I look at my own investments, the portfolio has grown so conservative (and diversified) in recent years (age 73) that I can’t conceive of a hit greater than 20-25% over the next decade. When I look at the modest 5 year performance of some of my “riskiest” funds like DODBX and RPGAX I’m not seeing “bubble.” So, while I do view many equity markets (NASDAQ, S&P) as in bubble territory, I’m not so worried about my own investments that I’d want to trade a substantial % of them for a fixed rate bond - even though by today’s standards the “yield” would surpass what one can purchase in the fixed income marketplace.
Hope others will share their thinking.

I am trying to decide whether to pay off a fairly new 30-year (4% fixed) mortgage or ride it out the term or pay additional principle and reduce the payoff time. I am not using complicated math, just rudimentary figures and math.
I guess conventional wisdom is that if you can make more than the the interest rate investing, then invest. I want to come at this in a slightly different angle.
30-year (4% fixed) mortgage
$150,000 balance
$1,500 (P&I and a little extra for about a 10-year payoff)
If I continue on my current path, I will incur $50,000 in additional INTEREST.
If I invest the $150,000, using the rule of 72 and historical 7% return, then at the end of 10 years I would have doubled my investment to $300,000 gross, NET $150,000 profit.
Less the $50,000 of Mortgage INTEREST, I am left with $100,000 net gain after 10 years.
If I pay off my $150,000 mortgage balance, I then free up $1,500/mo and $18,000/yr. Over 10 years, that's $180,000 I can DCA invest (assuming no gains or losses).
Using this "fuzzy" math, ($180,000 - $100,000) I would net $80,000 MORE after 10 years, if I payoff the balance of my mortgage today.
FYI: At least ten years away from considering retirement
Any thoughts, suggestions, mild criticisms, etc are very welcome!
Thanks, Matt

Buying more TCELX at rock bottom prices. If it goes up in a few years, then I’ll use it to help
purchase a condo on the Indian River.

Hi catch,
Yeah, have been watching this fund for a while. Finally just held my nose, closed my eyes and hit the buy button. Why? Will say this small, new PM....it's their only fund. AI focused saying all that if you look at top 10, the usual suspects are there. If you look at the annual report, you'll see more. Also high turnover, which is what I want. No big gains up over 3.5%. No love ...... just playing. Young funds tend to do really well first 3 years.....playing that. We'll see.
I forget.....what tech do you own? I know it's a big part of your portfolio, right? Also I'm like Skeeter. I own more than 1 fund in a sector 'cause I can't pick a winner. I'm thinking it's because of an alcohol-induced thinking disease of some sort.....lol. Lucky I have a brown furry 4-legger as backup......one could say Plan B.
God bless
the Pudd

I have been using Fidelity Monitor & Insight for some 26 years on our family's Fido funds and it has served us well ! It was referenced back then on Fund Alarm. Their advice beats getting raked over the coals by some Investment advisor. Back when I started using - fees and expenses were outrageous.
Monthly letter also has a wealth of other information on Fidelity Funds.

Welcome to the “It’s not the Super Bowl without the Steelers, but it’s great that Troy was recognized as a first-ballot Hall of Famer” edition of the Mutual Fund Observer which is posted at https://www.mutualfundobserver.com/issue/february-2020/. Highlights include:

• my publisher's letter takes a swipe at robo-writers, and reports on an unusually fervent hug between Rob Arnott and Cliff Asness. Good news: the long-time sparring partners have agreed on something important. Bad news: it’s that 10-year returns look uniformly low. Both point you toward the long-unloved emerging markets, while Mr. Asness offers a version of “it’s time to be a bit grown-up” financial advice.


• a long-overdue profile of FAM Dividend Focus (FAMEX). Over the past year, we’ve done a series of data-driven articles that focused on equity-oriented funds that thrive when all others falter, but that still make decent returns. FAM Dividend Focus has earned its way into more of those articles than any other single fund. It was time to say just a bit more about it.


• Edward Studzinski has been meeting with, and sparring with, some very fine independent fund managers. He shares what he's learned about researching management strategies, the changing landscape, hubris and managers' insistence on tripping themselves up.


• “Getting More Bang” explores high capture / low downside capture equity funds. Capture ratio is a sort of “bang for the buck” measure: funds with a capture ratio over 1.0 are delivering more of the market’s upside than its downside. By picking a downside target (“I’m willing to take 90% of the market’s losses, but no more”), you can use the capture ratio to identify the funds which offer the greatest return for the risk you endure. It’s a simple and intuitive way to create your due diligence list. We offer the top 20 domestic and international funds.


• Lynn Bolin continues to explore the six rules of successful investing. This month: knowing your investment environment.


• Charles Boccadoro has responded to user requests for more fund portfolio data at MFO Premium; traditionally, we were analytics-rich but portfolio-poor. As he explains, that changed on February 1st.


• on a bright note, several first-rate funds have reopened to new investors, including RiverPark Short-term High Yield (RPHYX). RPHYX seems forever maligned because its portfolio doesn’t fit neatly in any box. RPHYX had the distinction of having the highest Sharpe ratio of any fund in existence for years. It's a low volatility / low-risk fund that's best used as a strategic cash fund. (I've owned it for a long time and use it in lieu of a savings account.) It has averaged 3.1% annually with a maximum drawdown, lifetime, of 0.6%. David Sherman's current reading of the market, bond as much as equity, is that it's time to maximize caution and his funds are positioned commensurately.

Liquidations, 74 manager changes, a dozen new names, two retirements and more …
The long scroll version is available at https://www.mutualfundobserver.com/2020/2/.
As ever,
David

"Crash">Weird, small, mid-month dividend. Nothing, as expected and per usual, toward the end of Jan. How come?
Crash, I have held PTIAX off and on over the years, and part of its performance pattern is a level of surprises that are difficult to predict. I have actually called them several times over the years and asked for some explanations, but never seem to get an answer that made much sense to me. It is essentially a barbell fund with nonagency mortgages on one end, and some Munis on the other end, including some taxable munis. I owned it in 2019 and held it for most of 2019, before selling it and taking profits at year end, and replacing it with IISIX which I find more predictable and dependable in its performance pattern.

"carew388">@dtconroe Is VMPAX comparable to BTMIX? Thanks for your contributions to this website !
carew, VMPAX is in the same category as BTMIX, is a little more risky than BTMIX with lower credit rating of bond holdings being in the BBB investment grade rating instead of BTMIX A rating. Standard Deviation of the 2 funds are very close with BTMIX being a little lower, and VMPAX has a longer duration than BTMIX. Credit Risk and Interest rate risk is higher for VMPAX which has worked to its advantage in 2019. So, my general answer is that they are similar but VMPAX is more risky. I did not select all the funds that could potentially go into the conservative list, but I could have listed a large number of investment grade short term bond oefs including VMPAX, ORSTX, and a host of other funds. It all depends on how much risk you want to take to get higher returns in hot bond markets like 2019, compared to lower returns in downmarket periods. Every investor has to set their criteria for risk and reward with funds they select. I have held BTMIX, VMPAX, and ORSTX over the years, but currently am not holding any investment grade short term muni oefs.

"Gary1952">I opted for NVHAX over BTMIX when I bought on 1-2-2020. The allocation to NVHAX was in my taxable account with money for future (most likely 2 years down the road) monthly expenses. I like the stronger performance over BTMIX. The short duration downturn recovered quickly in 2017 but I will watch NVHAX closely and switch to BTMIX or possibly AAHMX if I see the need to change. I am not a trader so holding on thru a downturn is similar to holding equities in a correction. Thanks for the update.
Gary, best wishes on your decision. Comparing a HY Short Duration Muni fund with a BB credit rating, to an Investment Grade Short Term Muni fund with a A credit rating, is all about risk and return and having your eyes wide open. NVHAX has been a good fund but it is much more risky than BTMIX--in downmarkets, and outside of seasonally strong periods,Muni bond oef risks need to be appreciated.

I opted for NVHAX over BTMIX when I bought on 1-2-2020. The allocation to NVHAX was in my taxable account with money for future (most likely 2 years down the road) monthly expenses. I like the stronger performance over BTMIX. The short duration downturn recovered quickly in 2017 but I will watch NVHAX closely and switch to BTMIX or possibly AAHMX if I see the need to change. I am not a trader so holding on thru a downturn is similar to holding equities in a correction. Thanks for the update.

(From John’s link) “In a recent survey, Schroders Investment Management questioned 1,004 men and women aged 45 to over 70 about retirement planning. ... Some 55% of respondents admitted they didn't know how their assets were allocated.”
This might explain that: Vanguard: More than half of DC participants investing solely in target-date funds Story
Makes sense to me that if someone who is not financially inclined defaults to their 401-K (or other employee plan’s) target date fund they would not be able to explain the “ins & outs“ of how that fund invests. Seems to me those funds are designed for precisely that kind of individual.
It would be nice if they all became fund junkies like most of us here - but that is not the reality. I don’t think any amount of citizenry education is likely to alter that. However, as one moves from contribution years to distribution years it’s likely their interest in financial matters grows. Experience on this forum testifies to that subtle transition,

By Alpha Gen Capital at SeekingAlpha.com
Summary
° Retirees have an over-reliance and spend far too much time on rates of return. Instead, investors should focus on cash flows, both in and out of your household.
° This is a construct of Wall Street who wants you to be placing all your investable assets into the market, while placing all the risk on your retirement on you.
° We think the next few years will show a significant shift in the way investors/retirees manage their financial retirement.
° It is our belief that a focus on cash flows, not rates of return, will be the future, including the use of income annuities.
Article Here

@MikeW: "DHEIX has an average annual return of about 4% and a MAXDD of only 0.2%. Looks like a very interesting fund. SD is only 0.7."
Also, DHEIX has only been negative one month. I shares were down 17bps in November 2016 while the benchmark was down 41bps. There have been 41 full calendar months of performance since inception (August 2016 through Dec 2019. The securitized debt in the fund is ABS 62%, all IG. The overall credit rating of the fund is 80% IG. Its duration is 1.43 years.

"Old_Skeet">@dtconroe,
I have enjoyed reading and following your thread on open end bond funds (oef).
One of the things that I picked up on in reading this thread is that you are a momentum type investor and move among one fund, or funds, to another from time to time. Would you please describe your process in doing this? What indicators you may use? What triggers movement? How do you track and etc?
I've been looking for a investing strategy that I might incorporate within my fixed income sleeve to keep it positioned within the faster currents. With this I've invested mostly in multi sector bond and income funds and let the fund manager find the better places to be invested. My fund's range of movenment between their 52 week low vs. 52 week high range from 2% on the low side to about a 6% range of movement on the high side. I've been thinking of a way to use this range of movement within my investment strategy. Any thoughts?"
Old_Skeet, I am on this forum, posting about OEF bond funds, because I am NOT a "momentum type investor", at least Not on a frequent short term trading basis. On M* there is some strong support for an investing approach, that uses momentum data based on 90 day moving averages, to invest in the "best" 4 or 5 funds. Based on the belief that 90 day moving averages signals the beginning or end of a performance pattern, investors will move between various bond oef categories, to select the "best" momentum based fund, with a strong emphasis on risk characteristics as well. I tried to use this approach for a few years, but I am not a good trader, am not very good at selling funds near their highs, and not very good at buying funds near their lows. There are some posters/investors who do this, and can do this much better than me. I am not criticizing them, but I need a different investing approach that fits my strengths, while acknowledging my shortcomings.
With that said, I am not a pure buy and hold investor, and I do keep up with total return performance data, and I will sell a fund during the calendar year when it is lagging severely, normally to reinvest those proceeds in other existing holdings that I am familiar with and approve of. I prefer bond oefs that will produce "at least" 4 to 5%, or more", annually, with low standard deviation, and relatively smooth upward total return performance, that have a history of holding up well in down markets. I will invest in 10 to 12 funds, with the intent of holding them for at least the calendar year, and at the end of the calendar year, I will rebalance my fund holdings, and may choose to replace some existing bond oefs, with similar but better performing funds. For example, I held BTMIX for the entire 2019 year, and I chose to replace it with another very conservative, but better performing Muni fund (AAHMX) for 2020. Another example is that I held PTIAX for almost all of 2019, but toward the end of the year, I chose to replace PTIAX with IISIX, because I believe IISIX will perform similarly in total returns to PTIAX over extended periods but with lower risk.
Some more frequent momentum based investors, will criticize me for not jumping on the performance bandwagon, because there is clearly a hot performing fund, they will hype continually, during very hot performing periods like 2019. I like smooth, above average performing funds, to hold for at least a year, and at the end of the year, my loyalty is then subject to intense re-evaluation for holding, selling, and possibly replacing them. I don't marry my investments, don't take a vow of holding them til death do us part, and do expect a level of total return performance (at least 4 to 5% TR) that is reviewed on an annual basis. In 2020, my 10 to 12 fund portfolio has almost all of the same funds I owned all of 2019, but I did replace a couple of those funds, I did increase the amount of my investment in several existing funds, and I did reduce the amount of my investment in a couple of my existing funds.