Stock market vs. buying house in cash
Hi everyone,
Could someone please help me in calculating what rate of return I would need to fix the mistake I made of cashing out stocks to buy a house in cash 5 years ago? I was young and didn’t know what I was doing and followed the bad advice of a family member. In the end I just blame myself though.
I’m literally up in the middle of the night because I can’t sleep thinking about what a dumb decision I made. I cashed out $450k in S&P 500 stock that I could’ve let grow and compound over 30 years with a 2.8% interest mortgage rate. The family member who gave the advice loaned the other $250k and later told me to stop paying because they didn’t want my money anymore (out of love). So that is how the $700k house was bought in cash, and it was new construction so it would’ve been the same price even with a 30 year mortgage.
By my calculations, I would need around a 20% rate of return over the course of 20 years on a $200k investment to get to around the same of what the $450k in S&P 500 would’ve been over the course of 30 years. Is that correct? (My current plan is to save and invest aggressively over the next 4 years, hopefully accumulating around $200k initial investment by then. I will be investing in a well-known tech stock that has had amazing growth so far that I really believe in long-term and that I think is a very safe bet long-term that I think has real potential to be around 20% average returns over 20 years).
To note, I have also invested about $75k into Nasdaq over the last 5 years, which I only was able to do because the house was paid off. So that adds some more complications to the calculations. Also, by my calculations, the mortgage interest would’ve been about $350k over 30 years.
Taking all of this into account, I would like to know what the rate of return would need to be to match what the S&P 500 stock would’ve been worth by the end of a 30 year mortgage ending in 2050.
Could someone please help me with the calculations? It is hard for me to be vulnerable, but my mental health has really been suffering lately because of this. Yes, I have a lot to be thankful for, but with other situations in my life and children depending on me, I feel like I have let my family down with my initial decision.
Thanks everyone.