Comment by itake
2 months ago
Young people can take risks that seem crazy to us older folks, because they have way more time to recover.
If you leverage invest early in life, even if it completely wipes you out (once), you can leverage your way back into money.
Well, it’s harder then you’re letting on if your leverage costs 20%+.
Apple is up 40% this year, VOO is up 27%.
20% cost and you’re still ahead
Yes if the market goes up a lot you win. That's generally how leverage works. The problem is when it goes down. Or, if you're borrowing at high interest, doesn't go up quite as much. (Which leads to many people selling, which drives the price down, which leads to selling, and so on).
And what if Apple is not up 40% this year?
Apple was down 24% during Dec 2021-Dec 2022. It could have happened this year, could happen next year. Nobody knows.
By comparison, VOO was down 18% during that period. If you put money in Treasury bonds, you come out positive.
My point is that there is a reason behind many practical, reasonable financial advice instead of "cash advance at 20%, and if you are lucky, you could still be ahead".
Dear reader: do not take financial advice from this person's comments.