Leverage Investments

MaxiRobriguez

Malthusian said:

 If you believe in omens, people posting about leverage strategies on Internet forums are the modern equivalent of the know-it-all shoeshine boy.

I look forward to being in economic text books of the future, as the reason for the 2022 stock market crash.

steampowered

Leverage makes perfect sense, if you use it properly and for the right reasons. 

Most regular people leverage their money to buy a house. You could excuse that decision as "everywhere needs somewhere to live" if people only buy the smallest house possible, but most people are perfectly happy to leverage themselves to buy a bigger more expensive house.  

Most companies use leverage to some degree. All private equity houses and most hedge funds (i.e. most institutional investors and a big part of a normal pension pot) use leverage. 

The point is that it needs to be used properly and as part of a careful strategy. Not at excessively high interest rates, or just to take excessive risks.

Thrugelmir

MaxiRobriguez said:

Malthusian said:

 If you believe in omens, people posting about leverage strategies on Internet forums are the modern equivalent of the know-it-all shoeshine boy.

I look forward to being in economic text books of the future, as the reason for the 2022 stock market crash.

Although you are in a leveraged position. You are far from being alone. Be plenty of forced sellers when the heat gets turned on. 

MaxiRobriguez

Thrugelmir said:

MaxiRobriguez said:

Malthusian said:

 If you believe in omens, people posting about leverage strategies on Internet forums are the modern equivalent of the know-it-all shoeshine boy.

I look forward to being in economic text books of the future, as the reason for the 2022 stock market crash.

Although you are in a leveraged position. You are far from being alone. Be plenty of forced sellers when the heat gets turned on. 

I'm not leveraged at the moment (aside from having a mortgage and a pension/S+S ISA) and I don't intend to be for a while...

adindas

MaxiRobriguez said:

lev-er-ar-je. Noun.

Just wondering what group opinion on leverage is? Not your run of the mill "I've got a mortgage and a pension" but leveraged funds or unsecured loans taken purely to invest with for example.

For those who like playing with fire, how have you leveraged up in the past? Was it successful? Would you do it again? Would you do it differently? How did you manage the volatility risk (if indeed you did).

I do leverage investment a few times but only when I have done DDs and believe that the odd is in my favour. Also it is not intended for long term.

The problem with leverage investment is that it does not matter how you do it, it will always cost you money comparing to using it with your own money (e.g buy multiple shares if you have enough money).

Let alone if you do it with CFDs, the clock is ticking day by day. Not to mention weekend fees. Taking the risk paying fees but you can not sell it out of office hours.

I have done that many times with Mega caps stock such as Facebook, Amazon, Alphabets during the bull market. Result ?: Well I manage to make a small profit and have not lost money doing this to this date. But I only do that with fractional shares. I mainly do it with ETP and small amount of money.

I also do leverage mainly for Inverse ETF to short the market and hedge position with SQQQ,  But again for a very short term. It has never been intended for a long term.

Alexland

10% has always seemed to me a reasonable amount of leverage to be running for an investment trust where even under adverse circumstances the assets will clearly be enough to cover the liability if it was ever called in but in practice these long term borrowing facilities are rearranged plenty in advance. That's quite a different risk factor to the leverage when a person is using short term debt such as credit cards or personal loans to fund their stock purchases.

Our personal finances are similar where our mortgage leverage is around 8% of net assets and we have enough in S&S ISAs to clear it but choose to run it interest only to make good use of regular investing in LISAs, Pensions and VCTs for the various bonus or tax benefits. Each year the mortgage is a lower proportion of our growing net worth as although we are not repaying it we aren't borrowing more either. Once it gets down to around 5% of net assets it will be failing my materiality test so we might just repay it when we get some inheritance rather than be too clever and try and run it through early retirement to repay from my TFLS at 55 which is still a long time away. It's arranged until 65 which gives some flexibility.

london21

Depends on what you are investing in.
Depends on your risk apetite.
I will for example invest in property than indivitual shares or (buy bitcoin) with borrowed money. 

Also cash flow very important.

Thrugelmir

MaxiRobriguez said:

Thrugelmir said:

MaxiRobriguez said:

Malthusian said:

 If you believe in omens, people posting about leverage strategies on Internet forums are the modern equivalent of the know-it-all shoeshine boy.

I look forward to being in economic text books of the future, as the reason for the 2022 stock market crash.

Although you are in a leveraged position. You are far from being alone. Be plenty of forced sellers when the heat gets turned on. 

I'm not leveraged at the moment (aside from having a mortgage and a pension/S+S ISA) and I don't intend to be for a while...

Then keep it that way I'd suggest. This old adage is highly relevant at the current time. 

Rule No. 1: Never lose money.

Rule No. 2: Never forget rule No. 1.

MK62

Thrugelmir said:

MaxiRobriguez said:

Thrugelmir said:

MaxiRobriguez said:

Malthusian said:

 If you believe in omens, people posting about leverage strategies on Internet forums are the modern equivalent of the know-it-all shoeshine boy.

I look forward to being in economic text books of the future, as the reason for the 2022 stock market crash.

Although you are in a leveraged position. You are far from being alone. Be plenty of forced sellers when the heat gets turned on. 

I'm not leveraged at the moment (aside from having a mortgage and a pension/S+S ISA) and I don't intend to be for a while...

Then keep it that way I'd suggest. This old adage is highly relevant at the current time. 

Rule No. 1: Never lose money.

Rule No. 2: Never forget rule No. 1.

....possibly easier said than done though if you are living off your portfolio - though I suppose it really depends on what you define as a "loss".

Thrugelmir

MK62 said:

Thrugelmir said:

MaxiRobriguez said:

Thrugelmir said:

MaxiRobriguez said:

Malthusian said:

 If you believe in omens, people posting about leverage strategies on Internet forums are the modern equivalent of the know-it-all shoeshine boy.

I look forward to being in economic text books of the future, as the reason for the 2022 stock market crash.

Although you are in a leveraged position. You are far from being alone. Be plenty of forced sellers when the heat gets turned on. 

I'm not leveraged at the moment (aside from having a mortgage and a pension/S+S ISA) and I don't intend to be for a while...

Then keep it that way I'd suggest. This old adage is highly relevant at the current time. 

Rule No. 1: Never lose money.

Rule No. 2: Never forget rule No. 1.

....possibly easier said than done though if you are living off your portfolio - though I suppose it really depends on what you define as a "loss".

Putting capital at risk. That you cannot afford to lose. The higher the risk the greater the underlying volatility.