Ask The Compound – "Should You Pay Off Your Mortgage Early?"

Podcast: Ask The Compound
Hosts: Ben Carlson & Duncan Hill
Date: November 5, 2025

Episode Overview

On this episode of "Ask The Compound," Ben Carlson and Duncan Hill respond to listener questions on some of the hottest topics in investing and personal finance today. They dig into whether young investors should be worried about an AI-fueled market bubble, how much exposure to tech stocks is too much, and the ever-controversial question: Should you pay off a low-rate mortgage early? The hosts also explain the difference between buy-side and sell-side in the finance world and discuss the logic of keeping a significant cash allocation as part of retirement planning.

Main Discussion Highlights

1. Should Young Investors Worry About Market Bubbles?

Timestamps: 03:02–08:15

• Main Takeaway:
  For young investors with long time horizons, market bubbles (like the current speculation around AI) are almost inevitable but should not be a central concern.
• Ben's Reflection:
  Ben shares wisdom from his own book, stressing investors should plan for multiple bear markets, recessions, and several bubbles over a multi-decade investing career.
• Behavioral Insight:
  Trying to time bubbles or moving in and out of markets typically harms long-term returns.
• Quote:

  “If you're 35, you should hope that sometimes stocks crash so you can buy them on the cheap.... You're more likely to make mistakes trying to time these things than just sitting them out.”
  — Ben Carlson (05:58)

• Bubble Lessons:
  • The dotcom bubble led to today’s fiber optic infrastructure.
  • Asset bubbles are a recurring feature, not an anomaly.

2. How Much Tech Exposure Is Too Much?

Timestamps: 08:18–13:12

• Listener Concern:
  A listener with strong conviction in AI and tech wonders if it's reasonable to make tech 30% of their portfolio.
• Historical Context:
  Ben points out the last 15 years of tech returns have been extraordinary, but previous “melt-ups” (like the Nasdaq in the ‘90s and Japan in the ‘80s) eventually succumbed to sharp drawdowns.
• Market Cap Math:
  If you own an S&P 500 index fund, you’re already highly exposed to tech (the top 10 names — nine of which are tech — account for ~40% of holdings).
• Cautionary Perspective:

  “If you’re already overweight U.S. stocks, you probably have plenty of tech exposure as it is.”
  — Ben Carlson (10:13)

• Volatility Warning:
  Even the strongest tech names can suffer massive drawdowns (Apple, Amazon, Google, Meta, NVIDIA, Microsoft, and Tesla all have had major price collapses).
• Sizing Advice:
  If you decide to overweight tech, “size it appropriately and make sure you have the ability to lean into the pain somehow if and when these things get crushed.” (11:48)

3. The Great Mortgage Payoff Debate

Timestamps: 13:12–17:53

• Listener Dilemma:
  Should someone divert money from index funds to paying off a 3.3% mortgage ahead of schedule?
• Diversification Fallacy:
  Ben pushes back on the claim that paying off a primary residence adds diversification:

  “If you're paying off your house...that's concentration risk. You literally live under the roof of your house.” (14:17)

• Psychological vs. Financial Logic:
  While some find immense peace in being debt-free, Ben stresses that a sub-3% mortgage is an “asset” in today’s rate environment and paying it off early may be irrational.
• Inflation Context:
  “You're borrowing for free on a real basis. Your house is an illiquid asset. So you put money into paying it down but then you can't spend it.” (15:42)
• Behavioral Finance Boundaries:
  Ben acknowledges behavioral finance is powerful, but warns against letting emotion override efficient financial decisions.
• Clear Policy:

  “If your mortgage rate is 5% or higher, I bless you: pay off that mortgage early if you want. That's a way higher hurdle rate. I just think 3% is different...I really think it's a poor financial decision, regardless of how you feel about debt.”
  — Ben Carlson (16:35)

• Memorable Moment:
  The hosts joke about Ben’s strong language on the issue:

  “You said it's insane...to spend money on your home and own it outright.”
  — Duncan Hill, referencing Ben (18:02)

4. “Die With Zero” vs. Paying Off Your Home Early

Timestamps: 18:02–19:11

• Possible Contradiction?
  Ben is challenged on whether his "die with zero" philosophy conflicts with his opposition to aggressive mortgage payoff.
• Balanced Position:
  Ben clarifies: aim to have your mortgage paid off by retirement, but don’t rush it if you have a historically cheap rate.
• Cultural Context:
  Duncan connects with listeners burdened by high student loans, reflecting on differing attitudes to debt (18:57).

5. Buy Side vs. Sell Side — What’s the Difference?

Timestamps: 19:26–21:38

• Definitions:
  • Buy Side: Asset managers, hedge funds, mutual funds, and ETFs — they invest money on clients’ behalf and purchase research.
  • Sell Side: Investment banks and brokerages — they provide research, facilitate trades, and help companies raise capital.
• Career Insights:
  Ben recounts an early finance internship, discovering he preferred buy side over sell side;

  “The biggest thing I learned working on the sell side is I wanted to be on the buy side.” (21:05)

• Incentive Structures:
  Each side has different clients and incentives, a key consideration for those interested in finance careers.

6. Cash as Part of a Retirement Portfolio

Timestamps: 21:42–26:07

• Listener Question:
  Is it reasonable for a retiree to keep 8% of their portfolio in a treasury money market fund as part of overall fixed income?
• Host Support:
  Both Ben and Duncan approve; cash/cash-equivalents are a valid part of asset allocation, especially in retirement.
• Pros:
  • Liquidity, emergency reserves, buffer against market volatility, and “dry powder” for future opportunities.
  • Cash outperformed stocks and bonds during the inflation of the 1970s; now people more widely recognize its role.
• Main Risk:
  Money market yields will drop if/when the Fed cuts rates. It's important for retirees to be comfortable with lower future returns from cash allocations.
• Practical Rule:

  “How many years of spending do you want to have in cash to make you feel good to take risk elsewhere in your portfolio?”
  — Ben Carlson (25:13)

• Duncan’s Note:
  There are now more types of bond ETFs than ever before, adding complexity to fixed income investing (26:07).

7. Tone, Community, and Miscellaneous Moments

• Community:
  The episode is lively, interactive, and self-deprecating, with Ben and Duncan referencing questions from the YouTube chat and poking fun at themselves and the finance industry.
• Ben in Vegas:
  Opens with Ben operating from Las Vegas and likening casinos to the stock market — but with the odds inverted.

  “The stock market, if it is a casino, it's the best casino there is, because the longer you stay in it, the higher your odds of success.” (02:33)

• Humor:
  Ben’s wife trusts ChatGPT’s answers over his (07:42), and the chat community is described as more fun than the actual show at times (26:27).

Notable Quotes

| Timestamp | Speaker | Quote | |---|---|---| | 05:58 | Ben | “If you're 35, you should hope that sometimes stocks crash so you can buy them on the cheap..... You're more likely to make mistakes trying to time these things than just sitting them out.” | | 10:13 | Ben | “If you're already overweight U.S. stocks, you probably have plenty of tech exposure as it is.” | | 14:17 | Ben | “If you're paying off your house...that's concentration risk. You literally live under the roof of your house.” | | 15:42 | Ben | “You're borrowing for free on a real basis. Your house is an illiquid asset. So you put money into paying it down but then you can't spend it.” | | 16:35 | Ben | “If your mortgage rate is 5% or higher, I bless you: pay off that mortgage early if you want. That's a way higher hurdle rate. I just think 3% is different...I really think it's a poor financial decision, regardless of how you feel about debt.” | | 25:13 | Ben | “How many years of spending do you want to have in cash to make you feel good to take risk elsewhere in your portfolio?” | | 02:33 | Ben | “The stock market, if it is a casino, it's the best casino there is, because the longer you stay in it, the higher your odds of success.” |

Timestamps for Key Segments

• Market bubbles & young investors: 03:02–08:15
• Tech stock allocation: 08:18–13:12
• Mortgage payoff debate: 13:12–17:53
• “Die With Zero” philosophy: 18:02–19:11
• Buy Side vs. Sell Side: 19:26–21:38
• Cash in retirement portfolios: 21:42–26:07

Episode Takeaways

• Young investors should expect bubbles, but not let them dictate strategy, especially with long horizons.
• Many index funds already provide heavy tech exposure—a “tilt” higher comes with greater volatility risk.
• Paying off a low-rate mortgage is more a psychological comfort than a sound financial choice in low-interest environments.
• Buy-side and sell-side are distinct finance sectors; understanding both helps clarify market incentives.
• Cash reserves play a vital role in retirement security, but yields aren’t guaranteed to stay high.

For personal finance questions or topic suggestions, listeners can participate live or write to askthecompoundshow@gmail.com.