Meeemeees
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He that goes a borrowing goes a sorrowing.
—Benjamin Franklin
Younger investors appear to be more open to taking on debt for investment as compared to older generations. In the recent MagnifyMoney survey in America, 80% of Gen Z investors and 60% of millenial investors borrowed to invest as compared to 28% of Gen X investors and 9% of baby boomer investors. Interestingly, 61% of the respondents who had previous experience of borrowing to invest indicated they would do it again although 63% regretted taking on debt. 33% would consider doing it again. Is the willingness to take on debt for investment a bad sign?
A penny saved is a penny earned.
—Benjamin Franklin
Debt is often seen as negative but it is not necessarily bad. For instance, few people can afford to buy property without taking on debt. The crux is not to over leverage. Even if one has the funds to pay in full, it may be more financially astute to finance the purchase with debt if one has the expertise to deploy the funds elsewhere (such as $SPDR S&P 500 ETF (SPY.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Berkshire Hathaway-B (BRK.B.US)$ ) and generate a return that is higher than the interest rate of the debt.
Money can beget money, and its offspring can beget more.
—Benjamin Franklin
When it comes to trading, leverage can allow someone with a small capital to reap greater gains than would be possible otherwise. On the other hand, with high rewards come high risk. One can lose a lot more than the original amount invested. The risk is especially real when there is easy access to leverage and the trader is inexperienced. The high-profile case of a 20-year-old amateur investor committing suicide after thinking he had racked up USD730,000 of losses on Robinhood comes to mind. The key things to consider when deciding whether to take up leverage are one’s risk appetite, financial status, time horizon and financial objectives.
For those who wish to take on debt to trade, there are some ways in which the risk can be mitigated:
1) Only take on debt if the probability of gain is very high (i.e. the risk is low),
2) Limit the amount of debt to no more than a specified percentage of gross income and go for low interest rate debt,
3) Use option strategies to hedge the risks.
4) Understand the risks and work out the worst case scenario. Make sure it is something one can handle both emotionally and financially.
An investment in knowledge pays the best interest.
—Benjamin Franklin
At the end of the day, leverage is a double-edged sword. Spending time to understand it thoroughly will help one to decide whether it is suitable for oneself and when and how to employ it. All the best to you in your investment, be it with cash or leverage.
If you enjoy reading this article, please click and comment below. Thanks!
Check out Long Term Investment - A Strategy For Growing Returns Without Sleepless Nights https://www.moomoo.com/community/feed/107495017873414?lang_code=2
Disclaimer: The above is just my personal opinion. It is not financial advice or a recommendation to invest. Please do your due diligence and consult your financial advisor before making any investment decisions
—Benjamin Franklin
Younger investors appear to be more open to taking on debt for investment as compared to older generations. In the recent MagnifyMoney survey in America, 80% of Gen Z investors and 60% of millenial investors borrowed to invest as compared to 28% of Gen X investors and 9% of baby boomer investors. Interestingly, 61% of the respondents who had previous experience of borrowing to invest indicated they would do it again although 63% regretted taking on debt. 33% would consider doing it again. Is the willingness to take on debt for investment a bad sign?
A penny saved is a penny earned.
—Benjamin Franklin
Debt is often seen as negative but it is not necessarily bad. For instance, few people can afford to buy property without taking on debt. The crux is not to over leverage. Even if one has the funds to pay in full, it may be more financially astute to finance the purchase with debt if one has the expertise to deploy the funds elsewhere (such as $SPDR S&P 500 ETF (SPY.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Berkshire Hathaway-B (BRK.B.US)$ ) and generate a return that is higher than the interest rate of the debt.
Money can beget money, and its offspring can beget more.
—Benjamin Franklin
When it comes to trading, leverage can allow someone with a small capital to reap greater gains than would be possible otherwise. On the other hand, with high rewards come high risk. One can lose a lot more than the original amount invested. The risk is especially real when there is easy access to leverage and the trader is inexperienced. The high-profile case of a 20-year-old amateur investor committing suicide after thinking he had racked up USD730,000 of losses on Robinhood comes to mind. The key things to consider when deciding whether to take up leverage are one’s risk appetite, financial status, time horizon and financial objectives.
For those who wish to take on debt to trade, there are some ways in which the risk can be mitigated:
1) Only take on debt if the probability of gain is very high (i.e. the risk is low),
2) Limit the amount of debt to no more than a specified percentage of gross income and go for low interest rate debt,
3) Use option strategies to hedge the risks.
4) Understand the risks and work out the worst case scenario. Make sure it is something one can handle both emotionally and financially.
An investment in knowledge pays the best interest.
—Benjamin Franklin
At the end of the day, leverage is a double-edged sword. Spending time to understand it thoroughly will help one to decide whether it is suitable for oneself and when and how to employ it. All the best to you in your investment, be it with cash or leverage.
If you enjoy reading this article, please click and comment below. Thanks!
Check out Long Term Investment - A Strategy For Growing Returns Without Sleepless Nights https://www.moomoo.com/community/feed/107495017873414?lang_code=2
Disclaimer: The above is just my personal opinion. It is not financial advice or a recommendation to invest. Please do your due diligence and consult your financial advisor before making any investment decisions
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$Bitcoin (BTC.CC)$ so who is shorting the btc when at 49k?
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