Quote:
Originally Posted by Slava
Leverage is a double-edged sword and it can be awesome or a nightmare. It's hard for me to say whether it's a good idea for the average person, because there's not question that the risk tolerance for the person has to be higher. Let's face it; if the investment works out poorly (and some do), the consequences of that are magnified. If you have gains those are also magnified with leverage, but no one is particularly concerned about that side of things.
The problem comes when you leverage into a losing investment. You still have interest/loan payments and it can be painful. Part of the problem is that you can't just decide to "invest better" or whatever and suddenly things turn around. So you have these funds borrowed which have a negative value, and you're paying for that into the loan or interest, and the cure could well be time. I can't determine whether that makes sense for most people in this setting. If you want to discuss this, you could reach out though and we could definitely talk about your particular situation and that sort of thing.
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Thanks for your response. I guess I should have clarified that all my investments are VBAL and VGRO. The only risky single asset I own is my house. I'm not talking about leveraging for Bitcoin or weed stocks here.
For me, I don't see market index funds as being risky, more just subject to short-term volatility. If I don't need the money for 15 years and do not panic sell, being down the odd year doesn't bug me.
The thing is, I find it less risky than say taking out a second mortgage for an investment property, but the average person would rather borrow the money for a single asset than a diversified portfolio.