Building the financial moat, did you?

[Dan M.]

I'm curious to hear from investors who are choosing to build a financial moat instead of leveraging as much as possible. I'll define the financial moat as establishing a financial security blanket to survive downturns or bad years. I would love to hear from you especially if you have done so a while ago. What advantage do you see from this type of strategy? What disadvantages? How many years of expenses do you have covered?

For a little context I'm currently in the process of paying down a mortgage that adjusted from 4.5% to 7.5% . I view this as a guaranteed return of compounded 7.5 percent for the life of the loan ( In my case 14 years). By doing so I will reap this theoretical return and get bonus cash flow by eliminating the principal portion of the loan. Technically speaking this is an after tax return of ~6%. My rental portfolio averages around 19% and current investment opportunities with the inflated interest rates and prices that I have looked at will offer a return from anywhere of 8-18 percent depending on the amount of leverage. I don't mind growth but the rate of return has to be comparable with the amount of risk associated with it.

I have picked up a little bit of stocks with dividends that exceed this 7.5% ( after tax adjusted ~6% ) return as I figure this is a great time to get a good cost basis and potential future growth and higher return if the dividends increase, almost like a rental increase. Though for me it is really hard to beat that guaranteed 7.5%.  I keep some known upcoming expenses in treasury bills that are getting ~4.3%.

I guess I'm at a point where it makes sense to me to start to take risk off of the table ( I'm aware stock investing is risky, I'm mostly talking about paying down the 7.5% mortgage) and would love to hear from people with the same mindset. Long term speaking I believe it will allow for me to make more speculative / risky investments that can pay a higher yield once the moat is established.  Feel free to PM me instead of posting below if you don't want to make it public I would love to have a discussion about this with like minded individuals who are in the process or have already achieved a solid moat.