The Ins and Outs of Mortgages

When it comes to financial literacy, one of the Big Five Questions asks:

🧐 True or False: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.

The answer? TRUE.

This is a crucial point to understand when considering mortgages or loans. The length of your mortgage term can significantly impact not only your monthly payments but also the total cost of your home over time.

To illustrate, here’s an example:

Buying a $250,000 Home

• Down Payment: $50,000 (20%)
• Loan Amount: $200,000
• Interest Rate (Fixed): 5%

While the 15-year loan saves over $100,000 in interest, it requires a higher monthly payment. On the other hand, the 30-year loan offers lower monthly payments but costs 35% more over its lifetime!

At a minimum, you should know that:

• Loan terms, interest rates, and conditions can have a huge impact on your financial future.
• It’s vital to choose the term that fits your budget and financial goals.

WHERE ARE WE WITH THE MARKETS IN 2024?

THE MSCI World ACWI Index* is up 19% has seen an impressive performance in 2024, up 19% year-to-date (as of December 13).

To put this into perspective:

• If you invested $1 at the start of the year, it would now be worth $1.19.
• $10 would have grown to $11.90.
• $100 would have become $119.
• $1,000 would now be $1,190.
• And $10,000 would be $11,900.

This year’s returns reflect significant growth, continuing the strong recovery trend seen in recent years, barring the disruptions of 2022. However, it’s crucial to note that these returns are exceptional, not the norm.

To contextualize, past years performance of these indicices has been:

• 2020: +16.82% (strong recovery post-COVID-19 market crash).
• 2021: +19.04% (continued economic recovery).
• 2022: -17.96% (impacted by global inflation, rate hikes, and geopolitical tensions).
• 2023: +22.81% (benefiting from improved economic outlooks and tech sector strength)​

Despite 2024's robust 19% performance so far, market volatility remains a constant companion for investors. Factors such as inflationary pressures, central bank policies, geopolitical risks, and evolving market dynamics can cause fluctuations.

These are abnormal returns.

The expected forward AVERAGE rate of return of the MSCI ACWI Index is  7% year on year.

If there’s one key lesson from these 27 newsletters, it’s this: invest early, often, and globally. The past few years have demonstrated both the potential for incredible returns and the importance of staying invested through ups and downs. As always, remember that while recent gains are encouraging, maintaining realistic expectations and a diversified portfolio is essential for long-term success.

*ACWI= All Country World Index; it is a comprehensive global equity index developed by MSCI (Morgan Stanley Capital International). It serves as a benchmark for the performance of global stock markets, including both developed and emerging markets. The ACWI includes stocks from 23 developed markets (like the U.S., Japan, and Germany) and 24 emerging markets (like China, India, and Brazil).It represents over 2,900 companies across 47 countries

My favorite ETF providers: Ishares, Vanguard, State Street Global Advisros (SPDR), Fidelity, Amundi, UBS, Lyxor.

© Copyright, 2024,Elisabetta Basilico,@wealthmamma

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