Sell your home and invest in growth stock mutual fund
It wouldn't surprise me to see a country's return to show Inflation + 2-4%, on average. The members of this board are from all over the world, but those in a low inflation country, as the US,Canada, and Australia are right now, would be used to a long term return of 8-10%, with sub 2% inflation.  In your case, the 20% return is looking backwards, hindsight, and not a guarantee. Your country's 10 year bonds are just under 10%. The difference between the 10% gov bond and the 20% market return reflects the difference between a 'guaranteed' return vs a risky one.  Stocks and homes have different return profiles over the decades. A home tends to cost what some hour's pay per month can afford to finance.  (To explain - In the US, the median home cost will center around what the median earner can finance with about a week's pay per month. This is my own observation, and it tends to be correct in the long term. When median homes are too high or low compared to this, they must tend back toward equilibrium.)  Your home will grow in value according to my thesis, but an investment home has both value that can rise or fall, as well as the monthly rent. This provides total return as a stock had growth and dividends.  Regardless of country, I can't predict the future, only point out a potential flaw in your plan. The 20%+ returns you have observed in the mutual funds are not free money.  They are compensation for the risk associated with owning those funds.  Given the extraordinarily high returns you are seeing I would expect extremely high risk.  This means there is a good possibility of extreme losses at some point.  By putting a lot of money in those mutual funds you are taking a gamble that may or may not pay off. Assuming what your friend is paying you for rent is fair, you are not losing money on your house relative to the market.  You are earning less because you are invested in a less risky asset.  If you want a higher return, you should borrow some money (or sell your house) and invest in the market.  You may make more money that way. But if you do that, you will have a larger chance of losing a lot of money at some point.  That's the way risk works.  No one can promise a 20% return on a risky asset, they can only hint that it may do in the future what it did in the past. A reasonable approach to investment is to get invested in lots of different things: stocks, bonds, real estate.  If you are afraid of risk and willing to earn less, keep more money in safe assets.  If you are willing to take big risks in exchange for the possibility of high returns, move more assets into risky stuff.  If you want extreme returns and are willing to take extreme risk, borrow and use the money to invest in risky assets. As you look over investment options, remember that anything that pays high returns most likely has high risk as well.
First of all, there are some differences between the retirement accounts that you mentioned regarding taxes.  Traditional IRA and 401(k) accounts allow you to make pre-tax contributions, giving you an immediate tax deduction when you contribute.  Roth IRA, Roth 401(k) are funded with after tax money, and a non-retirement account is, of course, also funded with after tax money.  So if you are looking for the immediate tax deduction, this is a point in favor of the retirement accounts. Roth IRA & Roth 401(k) accounts allow the investment to grow tax-free, which means that the growth is not taxed, even when taking the investment out at retirement.  With Traditional IRA and 401(k) accounts, you need to pay tax on the gains realized in the account when you withdraw the money, just as you do with a non-retirement account.  This is a point in favor of the Roth retirement accounts. To answer your question about capital gains, yes, it is true that you do not have a capital gain until an investment is sold.  So, discounting the contribution tax deductions of the retirement accounts, if you only bought individual stocks that never paid a dividend, and never sold them until retirement, you are correct that it really wouldn't matter if you had it in a regular brokerage account or in a traditional IRA.  However, even people dedicated to buy-and-hold rarely actually buy only individual stocks and hold them for 30 years. There are several different circumstances that will generally happen in the time between now and when you want to withdraw the money in retirement that would be taxable events if you are not in a retirement account: If you sell an investment and buy a different one, the gains would be taxable. If you want to rebalance your holdings, this also involves selling a portion of your investments.  For example, if you want to maintain an 80% stock/20% bond ratio, and your stock values have gone up to 90%, you might want to sell some stock and buy bonds.  Or if you are getting closer to retirement, you might decide to go with a higher percentage of bonds.  This would trigger capital gains. Inside a mutual fund, anytime the management sells investments inside the fund and realizes capital gains, these gains are passed on to the investors, and are taxable.  (This happens more often with managed funds than index funds, but still happens occasionally with index funds.) Dividends earned by the investments are taxable.  Any of these events in a non-retirement account would trigger taxes that need to be paid immediately, even if you don't withdraw a cent from your account. "Funds - especially index funds - are a safe way for beginning investors to get a diversified investment across a lot of the stock market. They are not the perfect investment, but they are better than the majority of mutual funds, and you do not spend a lot of money in fees. Compared to the alternative - buying individual stocks based on what a friend tells you or buying a ""hot"" mutual fund - it's a great choice for a lot of people. If you are willing to do some study, you can do better - quite a bit better - with common stocks. As an individual investor, you have some structural advantages; you can take significant (to you) positions in small-cap companies, while this is not practical for large institutional investors or mutual fund managers.  However, you can also lose a lot of money quickly in individual stocks. It pays to go slow and to your homework, however, and make sure that you are investing, not speculating. I like fool.com as a good place to start, and subscribe to a couple of their newsletters. I will note that investing is not for the faint of heart; to do well, you may need to do the opposite of what everybody else is doing; buying when the market is down and selling when the market is high. A few people mentioned the efficient market hypothesis. There is ample evidence that the market is not efficient; the existence of the .com and mortgage bubbles makes it pretty obvious that the market is often not rationally valued, and a couple of hedge funds profited in the billions from this." "I don't know much about New Zealand, but here are just some general thoughts on things to consider. The big difference between buying a house and investing in stocks or the like is that it is fairly easy to invest in a diversified array of stocks (via a mutual fund), but if you buy a house, you are investing in a single piece of property, so everything depends on what happens with that specific property.  This in itself is a reason many people don't invest in real estate.  Shares of a given company or mutual fund are fungible: if you buy into a mutual fund, you know you're getting the same thing everyone else in the fund is getting.  But every piece of real estate is unique, so figuring out how much a property is worth is less of an exact science.  Also, buying real estate means you have to maintain it and manage it (or pay someone else to do so).  It's a lot more work to accurately assess the income potential of a property, and then maintain and manage the property over years, than it is to just buy some stocks and hold them.   Another difficulty is, if and when you do decide to sell the property, doing so again involves work.  With stocks you can pretty much sell them whenever you want (although you may take a loss).  With a house you have to find someone willing to buy it, which can take time. So a big factor to consider is the amount of effort you're prepared to put into your investment.  You mention that your parents could manage the property for you, but presumably you will still have to pay for maintenance and do some managing work yourself (at least discussing things with them and making decisions).  Also, if you own the property for a long time your parents will eventually become too old to take care of it, at which point you'll have to rethink the management aspect. So that's sort of the psychological side of things.  As for the financial, you don't mention selling the house at any point.  If you never sell it, the only gain you get from it is the rent it brings in.  So the main factor to consider when deciding whether to buy it as a rental is how much you can rent it for.  This is going to be largely determined by where it is located. So from the perspective of making an investment the big question --- which you don't address in the info you provided --- is: how much can you rent this house for, and how much will you be able to rent it for in the future?  There is no way to know this for sure, and the only way to get even a rough sense of it is to talk with someone who knows the local real estate market well (e.g., a broker, appraiser, or landlord).  If the property is in an ""up-and-coming"" area (i.e., more people are going to move there in the future), rents could skyrocket; if it's in a backwater, rents could remain stagnant indefinitely. Basically, if you're going to buy a piece of real estate as a long-term investment, you need to know a lot about that property in order to make any kind of comparison with another investment vehicle like a mutual fund.  If you already live in the area you may know some things already (like how much you might be able to rent it for).  Even so, though, you should try to get some advice from trustworthy people who know the local real estate situation." If you will leave the money invested for a good long while (years) then dividend paying stocks would be appropriate. There are many that pay yields of 3 to 4 percent, which you can take as income or reinvest to compound the growth. There is a lot of good analysis of stocks (and mutual funds that specialize in dividend paying stocks) at Morningstar.com "E) Spend a small amount of that money on getting advice from a paid financial planner. (Not a broker or someone offering you ""free"" advice; their recommendations may be biased toward what makes them the most money).  A good financial planner will talk to you about your plans and expectations both short and long term, and about your risk tolerance (would a drop in value panic you even if you know it's likely to recover and average out in the long run, that sort of thing), and about how much time and effort you want to put into actively managing your portfolio. From those answers, they will generate an initial proposed plan, which will be tested against simulations of the stock market to make sure it holds up. Typically they'll do about 100 passes over the plan to get a sense of its probable risk versus growth-potential versus volatility, and tweak the plan until the normal volatility is within the range you've said you're comfortable with while trying to produce the best return with the least risk. This may not be a perfect plan for you -- but at the very least it will be an excellent starting point until you decide (if you ever do decide) that you've learned enough about investing that you want to do something different with the money. It's likely to be better advice than you'll get here simply because they can and will take the time to understand your specific needs rather than offering generalities because we're trying to write something that applies to many people, all of whom have different goals and time horizons and financial intestinal fortitude. As far as a house goes: Making the mistake of thinking of a house as an investment is a large part of the mindset that caused the Great Recession. Property can be an investment (or a business) or it can be something you're living in; never make the mistake of putting it in both categories at once. The time to buy a house is when you want a house, find a house you like in a neighborhood you like, expect not to move out of it for at least five years, can afford to put at least 20% down payment, and can afford the ongoing costs. Owning your home is not more grown-up, or necessarily financially advantageous even with the tax break, or in any other way required until and unless you will enjoy owning your home. (I bought at age 50ish, because I wanted a place around the corner from some of my best friends, because I wanted better noise isolation from my neighbors, because I wanted a garden, because I wanted to do some things that almost any landlord would object to, and because I'm handy enough that I can do a lot of the routine maintenance myself and enjoy doing it -- buy a house, get a free set of hobbies if you're into that. And part of the reason I could afford this house, and the changes that I've made to it, was that renting had allowed me to put more money into investments. My only regret is that I didn't realise how dumb it was not to max out my 401(k) match  until I'd been with the company for a decade ... that's free money I left on the table.)" "First of all, congratulations on being in an incredible financial position.  you have done well. So let's look at the investment side first.   If you put 400,000 in a decent index fund at an average 8% growth, and add 75,000 every year, in 10 years you'll have about $1.95 Million, $800k of which is capital gain (more or less due to market risk, of course) - or $560k after 30% tax.  If you instead put it in the whole life policy at 1.7% you'll have about $1.3 Million, $133k of which is tax-free capital gain. So the insurance is costing you $430K in opportunity cost, since you could have done something different with the money for more return.   The fund you mentioned (Vanguard Wellington) has a 10-year annualized growth of 7.13%.  At that growth rate, the opportunity cost is $350k.  Even with a portfolio with a more conservative 5% growth rate, the opportunity cost is $178k Now the life insurance.  Life insurance is a highly personal product, but I ran a quick quote for a 65-year old male in good health and got a premium of $11,000 per year for a $2M 10-year term policy.  So the same amount of term life insurance costs only $110,000.  Much less than the $430k in opportunity cost that the whole life would cost you. In addition, you have a mortgage that's costing you about $28K per year now (3.5% of 800,000). Why would you ""invest"" in a 1.7% insurance policy when you are paying a ""low"" 3.5% mortgage? I would take as much cash as you are comfortable with and pay down the mortgage as much as possible, and get it paid off quickly. Then you don't need life insurance.  Then you can do whatever you want.  Retire early, invest and give like crazy, travel the world, whatever.   I see no compelling reason to have life insurance at all, let alone life insurance wrapped in a bad investment vehicle." If you're sure you want to go the high risk route: You could consider hot stocks or even bonds for companies/countries with lower credit ratings and higher risk. I think an underrated cost of investing is the tax penalties that you pay when you win if you aren't using a tax advantaged account. For your speculating account, you might want to open a self-directed IRA so that you can get access to more of the high risk options that you crave without the tax liability if any of those have a big payout. You want your high-growth money to be in a Roth, because it would be a shame to strike it rich while you're young and then have to pay taxes on it when you're older. If you choose not to make these investments in a tax-advantaged account, try to hold your stocks for a year so you only get taxed at capital gains rates instead of as ordinary income. If you choose to work for a startup, buy your stock options as they vest so that if the company goes public or sells privately, you will have owned those stocks long enough to qualify for capital gains. If you want my actual advice about what I think you should do: I would increase your 401k percentage to at least 10% with or without a match, and keep that in low cost index funds while you're young, but moving some of those investments over to bonds as you get closer to retirement and your risk tolerance declines. Assuming you're not in the 25% tax bracket, all of your money should be in a Roth 401k or IRA because you can withdraw it without being taxed when you retire.  The more money you put into those accounts now while you are young, the more time it all has to grow. The real risk of chasing the high-risk returns is that when you bet wrong it will set you back far enough that you will lose the advantage that comes from investing the money while you're young. You're going to have up and down years with your self-selected investments, why not just keep plugging money into the S&P which has its ups and downs, but has always trended up over time? "There is nothing legal you can do in the United States to avoid the tax burden of income earned as an employee other than offsetting it with pre-tax contributions (which it sounds like you're already doing), making charitable contributions, or incurring investment losses (which is cutting off your nose to spite your face).  So that $660K can't be helped. As for the $80K in stock dividends, you could move those investments into ""growth"" companies rather than ""value"" companies.  Growth companies are those that pay less in dividends, where the primary increase in wealth occurs only in share price increase.  This puts off your tax bill until you finally sell your shares, and (depending on how the tax laws are at that time) your tax bill will be lower on those capital gains than they are currently on these dividends. Regarding rental income I know nothing, but I think you're entitled to depreciate your property's value over time and count that against the taxes you owe on the rents.  And you can deduct all the upkeep expenses.  As with employment income, intentionally incurring rental losses to lower your tax bill is not logical:  for every dollar you earn, you only have to give about 50 cents to the government, whereas for every dollar you lose, you've lost a dollar."