Sometimes It's OK to Ignore the Maths

Editor's View: Choosing between mortgage payments and Isa investing is a decision about more the numbers, why volatility matters and the risks of buying high-profile IPOs

Holly Black 5 March, 2021 | 11:19AM
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Should you use spare cash to pay down your mortgage or to invest in the stock market? On paper, it’s a no-brainer. The stock market can return, say, 10% a year whereas your mortgage might only charge interest of 2% at the moment. That means you’re technically 8 percentage points better off by investing.

The growth you achieve through the investment on that basis could mean you pay off your mortgage more quickly with a lump sum at a later date, rather than chipping away at it with smaller ad hoc amounts.

But our finances are not just a maths problem, they are charged with emotion. And the peace of mind that comes from paying down your mortgage and the joy you may feel at working towards the goal of becoming mortgage-free may far exceed any glee from investment gains.

I think it comes from the fact that our home is a tangible asset, where we live (and work, these days!), which we spend our time decorating and improving, and which is filled with memories and moments. Gains on a stock market are just numbers on a screen until you cash out – which we’re told time and again not to do.

I’ll admit I’ve used spare money to make mortgage overpayments in the past rather than add a bit more to my Isa or pension savings. It might not be the logical move but it brings me satisfaction, peace of mind and a sense of pride. Maths be damned.

Watch for Deviation 

These days a tracker fund can get you access to virtually anything. Want to invest in robotics? There’s a fund for that. Want to tap into trends in ageing or equality? There are funds for those too. The same goes for anything from climate change to cannabis – and, of course, cryptocurrencies.

Investing in niche assets through a thematic fund can be a less risky way to get exposure to a trend. With crypto, for example, rather than put all your money directly into Bitcoin, you can invest in a passive fund that tracks the performance of the asset (more liquid and likely cheaper than investing directly) or even spread your investment across different types of cryptocurrency.

The appeal is easy to see: over the past 12 months the 21Shares Binance BNB ETP has retuned a staggering 996.3%. It delivered a return of 433.48% in February. But, as my colleague Valerio Baselli points out, investing is not just about past performance.

Standard deviation is a really interesting number to look at. It’s a tricky beast to grapple with and will involve one of those awfully complex calculators you haven’t used since GCSE maths to work out yourself, but the upshot is the bigger the number, the greater the volatility – i.e. the more ups and downs on the investment rollercoaster ride.

The standard deviation of the Binance ETP over the past year was almost 430%. The S&P 500’s was just 22%. It’s as clear an example of any that great reward comes with very great risk. And that just because you can access an asset, it doesn’t necessarily mean you should.

Should You Buy IPOs?

2021 is shaping up to be an exciting year for UK IPOs. Already we've seen Dr Martens come to market, my favourite pre-pandemic shoe (these days it's mostly slippers), and card retailer Moonpig. Now the float of food delivery app Deliveroo is a-coming. Hints in this week's Budget about making the UK stock market a more desirable place for companies to list could mean we see more big names join the ranks soon too. 

There's often a lot of fanfare around popular brands coming to market. The chance to own a slice of a company you know and use is an exciting prospect for many investors. Frequently though, a lot of hype leads to a lot of disappointment. Several IPO stocks of recent years have tanked and not regained their first day trading price. 

Does that mean IPOs should be avoided? Not necessarily. I think there's something to be said for owning a share in a company you genuinely love, even if it doesn't end up being the strongest performer in your portfolio. You're likely to feel passionate about it and that's no bad thing. 


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Holly Black  is Senior Editor,