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Do You Have an Open or Closed Mind?


cycle One of the things that struck me most about the book that I have just read on the book , Fooled by Randomness, by Nassim Taleb is his description of George Soros.

He depicted him as a person who is not afraid to change his opinions on something and to act immediately when that mindset or perception of something has changed. He could argue passionately that the market is going down and later changed his position and cover his positions.

Are you that sort of person? Would you stick to your position no matter what, or would you be adaptable, some may say fickle minded?

I remember an intellectual argument I had with a person who stuck to his position that to repay the housing loan in full is always good in a forum. We had a long discussion over forum posts arguing for our positions and to the extend of using Excel tables and formulas to espouse our stand.

The argument I put forth is that you can get much better investment returns than the housing loan rate of 2.6%. Unless the loan rate goes up drastically beyond the rate of investment that you would expect to get.

My position had actually changed from before. Not that I am anywhere near as good an investor as George Soros nor as adaptable.

I used to think like the person I argued with. A cousin was even persuaded by me to pay off his housing loan at a faster and end it earlier instead of stretching it.

But a chance conversation with an older colleague in the teaching profession of all things persuaded me to the fact that:

1. I would rather have $100,000 in a mix of investments and cash and earning a return higher than 2.6% Instead of fully paying for the flat. His argument is that you rather have that money in your pocket.

2. In case I go to visit the maker, my family don't have to downgrade to a smaller flat as the mortgage will be fully paid for. While paying off the apartment may mean little savings which the family will not be able to stretch over a longer period.

3. In case of retrenchment or unemployment you can whittle down your investment and savings to live that day longer and find that job, but if you have a fully paid off house and little to negligible savings, you will be forced to sell it and downgrade.

When I was hospitalised last year. I was thankful for that conversation with my colleague and that I was willing to listen and change my position. While I have recovered fully, there was always the chance I would go early.

If I had passed away there and then, I would have passed on an investment portfolio, an insurance payout plus a full payment on the almost $200,000 still left in the mortgage payment by the CPF board.

In the book by Nassim Taleb, I have been persuaded by his arguments to change my negative perception of options and relook and analyse this market to see if there are any investment opportunities and ways to extend my investment education.

When I have learnt more about it, I share more about options.

So do you have an open or closed mind?

And what is your position on paying off housing loans versus using it for investment instead?

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Anonymous said...
October 13, 2009 at 4:27 PM  

Wouldn't there be interest savings from accelerated payments to HDB? I've heard this from friends, but I don't think I've come across any illustrations.

Lemizeraq said...
October 14, 2009 at 12:21 AM  


Thanks for visiting. I have put up an illustration with an excel chart you can download. You can see the article here: http://www.financialfreedomsg.com/2009/10/calculations-of-savings-for-pre-payment.html

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