Margin

  • 03 Oct
    Good Debt Explained: Why You May Want To Take Out A Loan To Invest

    Good Debt Explained: Why You May Want To Take Out A Loan To Invest



    • Investing isn’t only about choosing the right stocks, it’s also about proper capital allocation.
    • Taking on leverage to invest can be smart but it can also be incredibly dumb.
    • From an historical perspective, it could be a very smart thing to be ready to refinance your home and invest in stocks.

    Introduction

    Buffett and Munger praise themselves for never taking out loans for Berkshire and one of the most famous Buffett quotes is:

    “If you’re smart you don’t need debt, if you are not smart, you better stay far from debt.”

    However, this is another half-truth that he tells the world. More →

  • 03 Apr
    Margin? Now? Really?

    Margin? Now? Really?

    • Margin levels are at record highs. History shows that this indicates high levels of greed and an inevitable bear market ahead.
    • It’s funny how when stocks are expensive, margin levels are high while when stocks are cheap, margin levels are minimal.
    • Leveraged investing should be only used when the earnings yield is above the interest rate. In such a situation, a personal bank loan is much better than investing on margin. If you can’t take a personal loan from your bank, forget investing on leverage as it pays more to pay off your credit card debt.

    Margin Levels Are At Record Highs

    It always baffles me when I see the level of greed in the investing community when the market is at all-time highs.

    A very small minority approaches investing from a risk reward perspective, and the rest approach it like a casino where they think they can beat the house. Further, a long bull market makes everyone think they’re so smart, while greed pushes them to bet more and more as losing seems impossible. More →