In Reply to: You don't get it. posted by MK on October 05, 1999 at 22:43:48:
: I had stocks that returned WELL over 15% yield both short term and long term. Not the tiny 7% that I would lose on the auto loan.
I don't appreciate the flames. We're supposed to be adults here.
Yes, your stocks, and mine, *HAVE* returned well over 15% of late. Historically, though, the stock market returns an average of 10%-11% per year. Take a look at the returns in the early 70's. Not only can that happen again but there are a lot of "experts" who are predicting that it will. Hopefully they've over reacted.
That's why stocks and funds have a statistic that's called Beta. It's a measure of volitility. If you accept increased volitility you should expect a higher return in order to compensate you for taking a higher risk. Beta is a way to express this mathmatically which allows you to adjust the return rate of various investments so that they can be compared on a equal footing.
You've also ignored taxes. Even assuming a 100% gaurenteed 12% return investment (there aren't any, of course) your after-tax return could be as low as 6% depending on your Federal, State, and local tax rates. Not paying 7% on a car loan will beat a 6% after-tax return on investment everytime.
: Leave the money making to others who know how to use it.
Well, I suppose we could get into an "I make more than you make" war but it would be counter-productive and I think you might lose. Instead, why don't you pick up a copy of _The Millionaire Next Door_ and read for yourself how the majority of America's millionaires pay for their cars.