Should You Refinance Your Mortgage To Invest In Tech Stocks?

by Pam on July 27, 2017

We’re living in strange economic times. On the one hand, interest rates remain at rock bottom, despite quarter-point incremental rises by the Federal Reserve over the last couple of years. And on the other hand, some sectors of the economy are booming – the tech industry in particular.

They say that history repeats itself, but more nuanced observers prefer to say it rhymes. And it appears as if we’re in one of those “rhymes” right now. Why? Take a look at interest rates and tech stocks. In the late 1990s, interest rates were comparatively low, and tech stocks were booming. Today the same is happening again, though it’s not clear whether or not we’re headed for another bubble.

Mortgage Interest Rates Are Below 3.9 Percent

The question for the average investor is whether they should refinance their mortgage to take advantage of higher returns elsewhere in the economy. The tech boom of the late 1990s and the early 2000s was a false start. But today in 2017, it appears that much of the initial hype about the power of digital technologies to change our lives is coming to fruition. Who could have imagined just 15 years ago all the ways in which the digital revolution would change people’s lives and drive the economy forward?

The reason why people should at least consider going to their mortgage broker and refinancing is that the potential upside of the latest wave of digital tech is enormous. If engineers in Silicon Valley and around the world can crack the code of artificial intelligence, then any companies that harness the technology will essentially make exponential returns. They’ll no longer have to rely on slow biological human brains to innovate: they’ll get access to machine minds that think a million times faster and don’t need any sleep.

So far over the last decade, the returns in the tech sector have been running at around 10 percent for a diversified portfolio. What’s astonishing is that this trend began before machine learning technologies really took off 2014/2015. The growth potential of the sector, therefore, could increase again as these new technologies find applications across the business sector of the economy.

The Benefits Of Refinancing

Refinancing has other advantages too, besides providing capital for investment. For instance, the majority of refinancing deals allow you to choose a fixed rate mortgage for the first five years with a low rate of interest. What’s more, with such low-interest rates, it seems silly to keep all that capital bound up in your home and not working for you.

Tech Stock Predictions

Where next for tech stocks? Well, according to The Street, the sky’s the limit. One of the big changes they see coming down the pike is autonomous cars, one of the first real-world applications of machine learning technologies that will revolutionize our lives. The upside of the technology is already being felt in valuations of companies like Tesla Motors, but this is something that will ricochet across the entire industry. There are other promising developments in VR and AR too which savvy investors ought to be interested in.

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