David Edwards

MBA
Personal Finance, Retirement, Investing
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“With over three decades of experience in the financial industry, David Edwards simplifies and clarifies the process by which his clients achieve their financial goals.”
Firm:

Heron Wealth

Job Title:

President

Biography:

David Edwards is president and founder of Heron Wealth, which provides financial planning, investment advice and estate planning to individuals and families across the United States and in Europe.

David graduated from Hamilton College with a concentration in History and Mathematics, and holds an MBA in General Management from Darden Graduate School of Business at the University of Virginia.

David contributed over 100 columns to TheStreet.com.   He is quoted frequently in Bloomberg, Wall Street Journal, Reuters, InvestmentNews, Money, Financial Planning and many other financial news sources.  David serves as a member of the Investment Adviser Association serving on the Legislation and Technology committees, and is an advisory board member for eMoney.  Prior to founding Heron Wealth, he was associated with Morgan Stanley, JP Morgan and Nomura Securities developing investment products and quantitative trading models.

David competes in sailing regattas from New England to the Caribbean and coaches a home town team in New York Harbor.

Education:

MBA, General Management, University of Virginia
BA, History/Mathematics, Hamilton College

Assets Under Management:

$320 million

Fee Structure:

1%/year for seperately managed stock and bond portfolios
0.75% for mutual fund portfolios
0.75% for exchange traded fund portfolios
$200/mth for couple-$100/mth for single- fin planning only

CRD Number:

146012

Videos
  • Behavioral finance - why we buy high and sell low
  • Life in a Box
  • Our Financial Planning App
  • How Heron Wealth helps you to achieve your financial goals
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    Debt, Estate Planning, Investing
Should I pay off my mortgage loan or invest with the money I am receiving from an inheritance?
100% of people found this answer helpful

This is a common trade-off question among families who have a substantial liability like a mortgage and also have a substantial asset – in your case an inheritance, but also appreciated company stock or stock options, or simply other savings.

Let’s presume that your original mortgage was $200K, 30 years at 3.5%.  At present, you’re paying about $900/month, of which about 60% is interest and 40% is principle.  You’re getting a tax break on the interest amount, so your after tax cost is closer to 2.75%.  Meanwhile, you could invest in a balanced (70% stocks/30% bonds) portfolio of tax efficient ETF’s and obtain 6.5% (our projection net of advisor fees over the next 20 years.)  So why wouldn’t you just invest in the market and pocket the difference of 3.75%?  Well, of course, the 3.5% is locked in, but the 6.5% is ONLY a projection – you could have a couple of poor stock market returns and really regret not just paying off the mortgage. 

Ah, but that’s the advantage of the balanced portfolio over a pure stock portfolio.  30% of $800K in bonds is $240K reserved in stable value securities.  You could pay off the mortgage at any time from the bonds, and still have funds working in the stock market for when it recovers (and it always does.)

Let’s say your $800K does indeed return 6.5% on average, so $52K in the first year.  You can easily route an extra $1000 a month in principal pay-down to your mortgage, which reduces the remaining term from 28 years to 10 – play with this calculator https://www.bankrate.com/calculators/home-equity/additional-mortgage-payment-calculator.aspx for more ideas.  At that point, your investment portfolio, net of $12K/year, should be worth around $1.3 million.  Alternatively, you could payoff the mortgage entirely now, invest $620K in the same strategy.  After 10 years, your portfolio would be $1 million.  If you also invested the $7200/year in cash flow savings from retiring the mortgage, your portfolio would grow to $1.15 million.

Our net recommendations:

  1. Balanced (stocks and bond) not all stock portfolios for the assets
  2. Commit to extra principal payments to cut the life of the mortgage in half
  3. Preserve the tax benefit of the interest deduction for now
  4. Preserve the decision making flexibility in investments that is not available in illiquid real estate equity.

Best regards,
David Edwards, President
Heron Wealth
www.HeronWealth.com

Direct: 347 580-5288
Mobile: 917 705-3893

Enjoy my videos!
Building a Financial Plan is easy...right? – 30 seconds
Behavioral Finance - why we buy high and sell low – 14 minutes
Explore Heron Wealth’s personal financial dashboard – 2 minutes

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