The investments sunk into X would need to average more than my interest on the loan. That may or may not happen.
120K over 15 years vs 30 costs 51K vs 120K in interest. After 2 years, the 15 year loan has you paying off $500/month in principle, while the 30 year loan has you paying off $159/month on your principle.
During your third year of ownership, that works out to paying off 6,000 and paying off $1900.
You can decide if you think your stock investments will outperform that. Over a 30 year period, the answer is probably. Over 5-10 years, maybe not. The additional value in your home is something tangible being purchased, vs stocks that are here today and may be gone tomorrow.
Of course, if you are stupid enough to buy at the top of a bubble, your house will lose value - but it is much easier to see a housing bubble than a stock market one.
That's true, but over a nine-year period that is not a bad "gamble" to make when: (1) you are dealing with historically low interest rates at the start of the nine-year period, and (2) the interest is tax deductible anyway (which means the investment would only need to average more than the effective interest rate, not the actual one.).
And buying at the top of a bubble is a terrible investment for two reasons:
1. The obvious problem with buying high.
2. The fact that the bubble is driven almost entirely by low interest rates, which means that you are not likely to ever face a scenario where you can refinance your mortgage at a lower rate, and at a time when declining interest rates have inflated the value of your asset.
The second point is an important one. Notice how some folks even here on this thread point out how well they did since the early 1980s. They point out that their first mortgages carried very high interest rates, but they may not understand that the declining interest rates are what drove up the value of their investments in the first place. This reinforces my prior statement that most people who buy homes buy a mortgage, not a home.
The additional value in your home is something tangible being purchased, vs stocks that are here today and may be gone tomorrow.
That's the beauty of an index fund. The whole aim of the fund management is that it accounts for the turnover of the companies. As long as there are at least 500 publicly held companies in the U.S., there will always be an S&P 500 index. More than 80 companies in the S&P 500 index have turned over since 2007, due to a combination of factors that include the demise of the company and the loss of market capitalization (they're no longer one of the 500 largest companies). But one of the most common reasons why a company is dropped from a major index like the S&P 500 is a merger or acquisition (ExxonMobil replacing Exxon and Mobil, Motorola Mobility acquired by Google, etc.).