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Originally Posted by pseudoreality
I'm curious about what your thoughts are for the average individual investor and leverage? Right now I'm at about 1/3 of my assets, concentrated in a mortgage at 2%. Although I recently renewed my mortgage, part of me feels like I'm being too cautious and should have refinanced my house to 80% to free up more cash for investing. I'm still 15 to 25 years from retirement and I feel like I'm not taking advantage of these low interest rates.
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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.