Mortgage or stocks?

To inform, to amuse, and to help you make money

Q If I have some extra money, is it better to pay off my mortgage faster or invest it in the stock market?

— S.J., Ocala, Florida

A Paying off your mortgage early can be worthwhile, especially if you’re nearing retirement. But depending on interest rates and your risk tolerance, investing in stocks could be a more profitable move.

If your mortgage interest rate is, say, 4%, then any extra principal you pay off will save you 4% in interest payments — which is like earning a (guaranteed!) 4% return. Given the stock market’s long-term average annual return of roughly 10% — or, to be more conservative, say, 7% or 8% — then investing in stocks is likely to outperform the 4% return.

Stock market returns can be volatile, but over long periods, most investors have done well. However, don’t invest money that you’ll need within the next five years or so in stocks.

Q Where online can I look up historical P/E ratios?

— L.B., LaCrosse, Wisconsin

A Past price-to-earnings (P/E) ratios are helpful to get a rough idea of how overvalued or undervalued a stock might be. If Buzzy’s Broccoli Beer (ticker: BRRRP) has a current P/E of 12, for example, and its P/E in the past has often been 16 or more, it’s looking undervalued. (That’s based only on this single metric, though; ideally, you’ll assess a variety of factors when you study a company.)

Several finance sites track historical P/E data. At Morningstar.com, for example, you can search for a company and click on its “Valuation” tab; that will show you the current P/E ratio (and other valuation-related measures), past years’ P/ Es and the five-year average P/E. dollars across a bunch of potential gems, understanding that some will likely fail.

Nikola’s stock has been volatile, rising and falling on hope and doubt — and a scandal, too, regarding false statements from the now-former CEO. Not only has Nikola been posting annual losses in recent years, but those losses have also been widening. It has big plans for electric trucks — but so do major automakers.