Paying off your mortgage may not be a good strategy

I've touched on this topic before but I want to reiterate that paying off one's mortgage might not be the best use of capital. If you have plenty saved for retirement as well as have income for your current needs then zeroing out your mortgage balance might work for you. But if you're cash-strapped or still need to save for your future then investing these funds will likely provide you a better return.

I understand the inherent belief that "property" has value but as seen in the recent housing crisis value can go south. Over the long haul, housing values typically keep pace with inflation. However, bubbles can form and prices can rise precipitously. Likewise, they can fall to unrealistic prices in a panic.

Few things move in a straight line so you may have years when one asset either outperforms or underperforms housing. But taking a long-term view you smooth these results. According to Credit Suisse, here are the inflation-adjusted annualized returns from the following asset classes from 1900-2011:

Stocks +5.4%

Bonds +1.7%

Housing +1.3%

Gold 1.0%

Cash 0.9%

Now there are times when you'd be happy to own anything but stocks. But using your home as a nest egg may be limiting your ability to grow your assets for retirement.