Sorry for the delayed response; I have been off-line for a few days!
Thank you ALL for your sage input and analysis!!!
I follow most of what is expressed/stated and if I interpret it as intended, it appears to me that:
1) paying off the mortgage immediately is not desirable
2) paying additional principle to reduce the loan duration is acceptable
Is that accurate?
To restate: the 1,500/mo P&I does include additional principle in order to reduce the loan duration to almost ten years.
As some have mentioned, what if future stock market & bond market returns are not what they have been over the last "several" years (I presume, that's likely). We've had one heck of a ride the last decade or so!
Would it not make an expedited pay-down of the loan more advantageous? 4% mortgage; 3.5% portfolio return over the next decade (for example).
If I am still missing the point, please help me understand.
Thx, Matt

Hi Gary,
Yeah, I think we'll do good as long as the market goes up. I saw on Fido they added more info to the fund page. I like that. Also I own GLFOX in that space. Have for years. Looks like they don't clash too much as far as which countries they invest in.
God bless
the Pudd

I wrote: The fund did well out of the gate, for its first two years, but has been essentially flat over the past three. My guess is that the star rating will nevertheless go up in a couple of weeks when the fund hits the five year mark.
The fund now has a five year rating, and its overall rating did go up to 2 stars. Still poor, pulled down by its last three years of performance. The point is that it is a good idea to look beyond summary figures, even ones that summarize the past 3, 5, or 10 years. Look also at how the fund has done over time, year by year, cycle by cycle.

Yeah - I don’t think I was reading it very clearly. Apologies @mcmarcasco. But I’ve taken the liberty of restating the question in a way that’s easier for me to comprehend. Hopefully, it hasn’t substantively altered the essence of the original question.
-
Question: I am trying to decide how best to repay a fairly new 30-year (4% fixed) mortgage. If I continue on my current path, I will incur $50,000 in additional INTEREST.
Here are the three options I’m considering :
(1) Pay off the mortgage now ... 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).
(2) Ride it out the term, investing 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.
(3) Pay additional principle and reduce the payoff time ($150,000 balance / $1,500 P&I / plus a little extra for about a 10-year payoff.
-
That’s how the question appears to me. (Hopefully close to the original intent.) I’ll leave the math here up to @msf or others with stronger math skills. Restating my original reaction: Paying off a 4% mortgage early strikes me from an investment standpoint as quite similar to purchasing a very high quality bond having a 4% compounded yield. You’ve effectively sacrificed the liquidity the loan provided in return for that guaranteed 4% compounded interest you would have paid the lender. For defensive positioning in a down market, a fixed rate long duration bond is beneficial. But in a “heady” equity market environment or a period of rapidly rising interest rates, a 4% bond would look lousy.

I'm not clear how you're reading this. On the other hand, I took the fact that this was a 30 year loan as irrelevant, while you're trying to figure out what it means.
All that matters for a loan that you amortize (pay down by paying interest plus some principal) are the balance remaining, the interest rate, and the monthly payments. How the borrower got to today doesn't matter - whether the borrower is in the 5th year of a 30 year loan, or the 2nd year of a 12 year loan, or ....
@mcmarcasco wrote of paying off the loan (principal and interest, P&I) in a decade.
If he were to make exactly 4% on his $150,000, then each month he could take $1500 (the earned interest and some principal) and use it to make the monthly payment on the mortgage. At the end of ten years, the $150K would be exhausted, and the mortgage would be paid off.
This is just saying differently what you initially wrote:

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.

This highlights again the point that one is comparing a potentially higher returning investment against the certainty of a 4% rate of return. Each has its merits.

@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.