Personal Finance & Money Stack Exchange
Personal Finance & Money Stack Exchange

Questions tagged [leverage]

Leverage is (1) the strategy of borrowing money to increase the potential return of an investment or (2) the amount of debt a firm uses to finance assets.

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How is early-and-often home buying as "get rich" advice feasible?

I am being told by this guy that the following is a guaranteed-to-work way to become rich and retire early. He says to start early. 20 years, or near that age. Buy 1 house a year. Rent it out. Start selling these houses after 15+ years. He says…
Okaei
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Why cannot LLCs be used to negate increased risks when doing leveraged investments?

Let's say that I am confident that some investment will grow by 15% per year, and that I have 10K to invest, and I'd like to use leverage to invest 100K. What stops me from creating an LLC with 10K in equity, have that LLC then borrow money (let's…
Zubo
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Investing in a leveraged index ETF for retirement. Risky?

Let's say someone has a few thousand saved in an IRA. Right now I have it sitting in Treasurys earning around 3%. Over the past 50 years the S&P has averaged around 11% per year in total returns. Let's say they wanted to invest the IRA balance in a…
user4946
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What's funny about "He leveraged his @#% deep into soy beans and cocoa futures" in The Jerk (1979)?

Near the end of the comedy The Jerk (1979), a character explains how their family got rich: Father: All I did was take the money you sent home and embarked on a periodic investment, in a no-load mutual fund. Taj: He leveraged his ass deep into soy…
Atomic Tripod
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Is betting on "isolated margin" just crazy fun or financial folly

First off, no, I am not trolling, I have actually pondered this question. Some entities offer in advertising a 10,000x pseudo-leverage on so-called "isolated margin" gaming. Now, I've considered a theoretical scenario: I buy some cryptocurrency…
FledDev
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Is there any instance where less leverage will get you a better return on a rental property?

The larger a mortgage I have on a property the less money I have to put up front so my initial cash flow is worse but my cap rate and overall return is better. However the larger my down payment the better my cash flow immediately because the…
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Is CFD trading a good idea?

I am planning on speculating in forex and possibly indices, however due to my lack of experience I don't want to invest too much. With £100, you can't really get very far with indices, and profit in forex would be nearly unnoticeable. For this…
DividedByZero
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Pros/cons of borrowing money using a mortgage loan and investing it in a low-fee index fund?

I'm wondering if this investment strategy would work: I get a mortgage loan for $300K at a 3% rate (realistic for current 5-year fixed mortgage rates here in Canada). I invest the proceeds in a low-fee index fund, such as Vanguard's Total Stock…
ramav
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Need help understanding the use of leverage in the stock market

I am a newbie and need help understanding the leverage. Suppose I have $10k to invest and I decide to invest in 1 stock $XYZ with leverage 1:5 and that I buy 100 shares of this $XYZ at $30 per share. My investment should be $3k but because I use 1:5…
Andrea D_
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Is CFD a viable option for long-term trading?

Something really does seem seedy that if I invest $2500, that I'll make above 50k if the stock doubles. Is it really that easy? Looking at the opposite side, yes my investment can vanish from just a small drop in the price however I have funded my…
Francis Kim
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Can you beat the market by investing in double long ETFs?

Certain ETFs double the daily rate of return of certain indices. Can you use such ETFs to beat the market (not on a risk-adjusted basis, just in terms of pure returns)? I have read that When based on high volatility indexes, 2x leveraged ETFs…
Uwat
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Why don't index ETFs use leverage to offset their fees and eliminate tracking errors?

If a hypothetical stock index returns 100%, an ETF tracking the index might only return 99% because of ETF fees. This introduces tracking errors. Why don't index ETFs use leverage to offset the fees they charge, so that they could track their index…
user102086
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Financial leverage - why am I only responsible for my securities?

I'm a newbie in trading and I've been reading about the financial leverage mechanism when trading CFDs. From what I got it works by letting me trade on margin by moving greater amount of money lent by the brokers. I also got that I'm responsible…
Dean
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Investing using leverage

As a trader, I understand the premise of Leverage and Margined accounts. I understand that it is almost necessary to use leverage in order to make money from trading. But the question is about Investing and not so much trading. Trading can…
PMP
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What are the risks associated with leveraged trading accounts?

What is a leveraged account and why is it mandatory on some trading platforms to operate through leverage? Also, what are the associated risks? Could I end up losing more money than I invested?
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