139
votes
How is early-and-often home buying as "get rich" advice feasible?
How do you buy 1 house a year?
You save up the money you make from the rent for a down payment on the next house. Then you save up the money from those two houses and buy two more the next year (or ...
- 142k
80
votes
Accepted
Is betting on "isolated margin" just crazy fun or financial folly
What you are overlooking is that your losses are quite certainly not capped at your initial investment. So if the price falls by 1%, you now owe your broker 990€.
Simply putting in a sell order at 9....
- 2,558
60
votes
Accepted
What's funny about "He leveraged his @#% deep into soy beans and cocoa futures" in The Jerk (1979)?
The joke contrasts a low risk investment strategy with an extremely high risk strategy. The modern equivalent would be "He leveraged his ass deep into Bitcoin and GameStop futures."
The low ...
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56
votes
Why cannot LLCs be used to negate increased risks when doing leveraged investments?
Answer: Due diligence by the lender.
It occasionally happens, and sometimes the lending officer is in on a scam, but banks do not tend to loan money where there is a large chance that they will not ...
- 79.6k
42
votes
Is betting on "isolated margin" just crazy fun or financial folly
Stop Loss is Not Magic
If your broker could force someone to buy your rapidly declining shares at a particular price, they would not be a broker, they would be the richest person on the planet. In a ...
- 1,839
35
votes
Can I see how a company is using its debt?
Money is 'fungible'. That means that any single dollar in circulation is identical to every other. If I pick up a lucky quarter on the street, and put it into my right pocket, then when I buy a candy ...
- 43k
32
votes
Accepted
Why don't index ETFs use leverage to offset their fees and eliminate tracking errors?
Leverage can be good to increase gains, but it amplifies movements of a stock. Also downward movements. Paired with the increased gains is also an increased risk, and that changes the investment ...
- 2,457
27
votes
Why cannot LLCs be used to negate increased risks when doing leveraged investments?
Alright, so the bank would still, then, agree to lend 10K against the 10K in equity, right? That still significantly increases profits (24% vs 15%) and would afford the same loophole.
As a general ...
- 21k
24
votes
How is early-and-often home buying as "get rich" advice feasible?
20 years, or near that age. Buy 1 house a year.
As you probably know this is near impossible to do. Have around 20 years and be able to get loan for buying house.
You are on right track that you ...
- 2,356
18
votes
How is early-and-often home buying as "get rich" advice feasible?
Whenever I learn about some scheme for making money, I always ask myself:
Why aren't they doing this themselves?
Why are they teaching this?
It's likely they're teaching it, and spoiling it, instead ...
- 281
17
votes
How is early-and-often home buying as "get rich" advice feasible?
It's possible. But a lot of layers of swiss cheese have to align at once (or rather, be aligned by a person with mad skillz).
First, you must make reasonably good money - i.e. a highly skilled ...
17
votes
Accepted
Need help understanding the use of leverage in the stock market
First, you're probably not going to get 5:1 leverage in the stock market. In the US, if you're holding the position overnight, you're limited to 2:1 leverage by Reg T. If you are a pattern day ...
- 28.3k
16
votes
Why cannot LLCs be used to negate increased risks when doing leveraged investments?
Where your scheme fails is the bankruptcy. It wouldn't work.
You'd be personally liable: the shield wouldn't hold
You get the loan. When you default on the payments, and certainly the moment ...
12
votes
Why cannot LLCs be used to negate increased risks when doing leveraged investments?
I think you simply need to understand credit risk. A newly formed Corporation with zero operational history and a $10,000 bank account is, from a default risk perspective, a suicidal toddler with $10,...
- 49.1k
9
votes
How is early-and-often home buying as "get rich" advice feasible?
a video on youtube which has thousands of views
Wow, thousands of views! On a site with 1 billion users! He must really know what he's talking about!
There is rarely a way to make tons of money with ...
- 3,818
9
votes
Accepted
Where can I invest into S&P500 without leverage
Member mhoran's comment was an answer.
why not just invest with any of the dozens of mutual fund companies
that have an S&P 500 index fund or ETF?
The ETFs are more commonly not leveraged. ...
7
votes
Why cannot LLCs be used to negate increased risks when doing leveraged investments?
Why cannot LLCs be used to negate increased risks when doing leveraged investments?
If the investment performs poorly and in fact loses 50% in value, I end up with 50 - 95.4 = -45.4K in debt, after ...
- 5,107
7
votes
Financial leverage - why am I only responsible for my securities?
A CFD broker will let you open a trade on margin as long as your account balance is more than the margin required on all your open trades. If the required margin increases within a certain percentage ...
- 21k
7
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Is betting on "isolated margin" just crazy fun or financial folly
In the NYSE, the smallest unit of share price is one eighth of a cent, so I would assume that for European exchanges, it's either the same, or 0.01 EUR, or 0.001 EUR. So a price of 9.999 EUR would ...
- 10.6k
7
votes
Is betting on "isolated margin" just crazy fun or financial folly
You are almost certainly misunderstanding what will happen. There is not a single 'price' where you can buy and sell for the same amount. There are individual orders out there at various prices for ...
- 316
6
votes
Is betting on "isolated margin" just crazy fun or financial folly
While stock prices are often portrayed as going up and down in some smooth process, it's important to understand that they really represent a sequence of not-necessarily-contiguous snapshots.
Suppose, ...
- 878
5
votes
Is CFD a viable option for long-term trading?
Yes it is viable but uncommon. As with everything to do with investment, you have to know what you are doing and must have a plan.
I have been successful with long term trading of CFDs for several ...
- 151
5
votes
"Leverage" vs "buy a modest house"
It's really a matter of your tolerance for risk.
It sounds like your local market is very strong, but I'm twice as old as you, and I've seen decades long strong markets fall apart and leave friends ...
- 14k
5
votes
Accepted
Considering leverage
I wonder which quantity would you think could be reasonable in my situation.
How about zero? You are borrowing at a fixed rate of interest in order to invest and get a risky variable rate. I don't ...
- 142k
5
votes
Accepted
Why do banks agree to finance Private Equity buyouts?
The company doesn’t in fact generally go bankrupt. Occasionally it does, and the bank loses its money, but if the bank is competent then the interest it earns on all the similar loans that don’t go ...
- 23.7k
5
votes
Why don't index ETFs use leverage to offset their fees and eliminate tracking errors?
When the index goes down, leverage will exacerbate the losses instead of offsetting them.
- 3,447
5
votes
Why would rising interest rates favor the company with more long-term debt?
The cost of your existing debt is fixed; it stays the same no matter how interest rates change. It's only new debt that is affected by the current interest rate.
Rising interest rates means your ...
- 4,476
5
votes
Is betting on "isolated margin" just crazy fun or financial folly
As the other answer explains, if you have a leverage of 10'000x, it can go up that much, gaining you almost 1000 EURs, but it can also down that much, and then you thus are in debt with the broker.
An ...
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