Does anyone here have any experience with using leverage in their personal account? Joining a BB and want to make the most of my savings to aggressively grow my pie until I can get levered co-invest at my future pe fund/whatever.
I've vaguely looked into IBKR but would really find value in anyone sharing any experience they've had in this situation as well.
| +355 | Evercore Intern Seizure | 54 | 7h |
| +67 | JPM M&A is Gone??? Purely Coverage Banking??? | 31 | 6h |
| +58 | Is DCM actually underrated ? | 24 | 17h |
| +50 | How do I understand vs. just memorizing? | 5 | 16h |
| +48 | Losing my personality in Banking | 9 | 17h |
| +47 | Are all Tech / TMT groups sweaty? | 38 | 13h |
| +42 | Associate & Above IB exits | 16 | 3d |
| +32 | Incoming IB Analyst: Best Ways to Prepare? | 10 | 9h |
| +27 | Which groups are ideal for laterals? | 12 | 11h |
| +24 | The good and bad with Wells Fargo | 1 | 17h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
buying deep out of the money options on TQQQ seems like your best bet. please update with results
I'm on SQQQ calls in anticipation of a rate hike :)
I see us going negative before they hike them with this administration lol
I'm interested too screw this 7% annual BS. How do these people put up with it. It's enough that we can't even trade any single equities on our discretion freely and the market has never been easier (at least for me).
IBKR gives you margin at 2% even on small amounts- not sure what more you were looking for... Also good luck...
Advice would be wonderful, sharing your experience or any insight into this as well. I know it’s open ended but I was hoping to spark discussion from those who may have insight into using these products, alternative ways to get a better risk/reward ratio, etc
My advice is don't use leverage for securities investing and especially not at present valuations. Unless you are of the view that the market is really cheap I just don't think this is the time in the cycle to be levering up your equity risk. But, if you choose to, the margin loans at IBKR are incredibly low % given Fed-Funds is at 0. Remember though, this is floating rate debt so if and when rates go up at some point you could see a loss in your stock holdings at the same time your funding cost is increasing.
Thanks for the view, I’ve been thinking something similar.
What are your thoughts on having 40% of my portfolio being a 50/50 split of TQQQ/TMF, 30% in value stocks (energy, whatever), and 30% in SPY for the next few years? I have a high risk appetite and a long view, but would definitely get out of TQQQ if the market looks like it’d crash again
the market isn’t gonna look like its crashing until it’s already crashed and your TQQQ is down 60%
Top
Been reading Lifecycle Investing by Barry Nalebuff and Ian Ayres, which covers exactly this. Wondering how it’s possible with compliance in IB. Robinhood margin rates are only 2.5% after the first $1,000 (and 6% on the first $1k) btw
yeah Lifecycle is great until it isn't. I have yet to see them cover what happens if you get margin called.
Getting margin called should be very pretty much impossible if you're not over-levered and smart about where you're investing. Also, dollar-cost averaging your margin allocation in SPY should mitigate getting wiped out
Dude I'm with you, but how are you going to pull any of this off with all the trading restrictions and other crap. If things start looking south you're going to have to wait awhile before you can even get cleared to sell a position just like that
How long would I be locked in to sell a position such as TQQQ or an ETF. Wouldn’t I be able to immediately sell it since it is a n ETF?
---
https://www.bogleheads.org/forum/viewtopic.php?t=272007
Give this a read. If you can stomach the volatility this strategy makes a ton of sense imo.
I'm doing this as soon as we get at least somewhat of a semblance of a general pullback or "crash" if I have to wait another year or two in cash so be it. The bounce back will be glorious.
EDIT: After reading, I realize this can also work in market downturns. The only way you are screwed are if either the S&P or treasuries drop 33% in a single day (and the other does not increase). I'll take those odds screw Dave Ramsey and his 7% bullshit rather die on my feet than live on my knees. Millionaire by the ripe age of 60? No thanks, Dave.
Does being at a BB and having to go through compliance fuck with this at all?
I don't believe so because it's not much different from just long-holding the regular indexes/bonds. You just may have to re-balance the 60/40 portfolio mix more than the regular portfolio but it's not like you have to be constantly doing that.
nice share, havent been on Bogle heads in quite a while. First time I found out about that site was the legendary guy who lost a ton during '08 but kept buying throughout the crisis to average down. wonder what he's up to nowadays
Use margin if you want leverage, don't use leveraged products like TQQQ as a long-term investment vehicle. Amazing to me that a finance forum like this would actually encourage that.
If you don't understand why leveraged ETFs like TQQQ are structurally bad investments over a long holding period (more than a few days), a quick Google search will tell you.
TQQQ survived COVID and vastly outperformed any possible margin index index. Keeping a fixed (constantly adjusted back to) % 50/50 split of it and TMF makes a lot of sense
Easy to look back and cherry pick a period where tech drastically outperformed and say how great the strategy is. As I said, leveraged ETFs are terrible long-term investment products - large embedded transaction costs and the fact that they are leveraged to daily exposure means you lose money in a flat market and also lose money in up markets where the magnitude of down days exceeds that of up days.
I'm not talking out of my ass here.... I actually understand how these products work but by all means intern, knock yourself out and let us all know how it goes. You may get lucky but as someone who is in the industry, I wouldn't ever put my or my family/friends money in it as a long-term hold.
Levered ETFs are GREAT long term investments. The levered ETFs go to zero are the short ones like SPXU. TQQQ is a fantastic long term investment in today's macro environment if you don't buy the absolute top, have a high risk tolerance, and long term investing horizon.
Don’t throw MS, LOOK at the 5 year chart for TQQQ. Does it look like it’s going to zero or does it look like it’s going to fucking moon? Obviously past results are not indicative of future performance blah blah blah but don’t buy BRK.A unless you’re a retired boomer
Quick Google search will show you that leveraged ETFs are basically THE BEST investment over a long holding period (more than a few days)
Just because there is potential for decay doesn't mean it is bad. There is also potential for positive directional compounding which is why over the long term leveraged etfs outperform where the underlying has seen periods of strength. I'm not saying they are great products that suit everybody. But to say they are bad and to avoid is short sighted and to encourage using margin instead is just plain incorrect.
Any opinions on this
Frequently Asked Questions - Leverage Shares ETPs
Don't listen to these value-investing Buffett worshiping cucks. Use leverage (up to 2x) on everything, including individual stocks. The market always goes up over time. Buy TQQQ SOXL UPRO FNGU (levered ETFs) and buy and hold. Buying and holding UPRO would've given you a 450% return last five years, SOXL 2000%, TQQQ 1200%, FNGU 420% in three years. Past results aren't indicative of future performance, this isn't financial advice, blah blah blah. Yeah you'll lose a lot of money when it crashes, you'll have to stomach volatility and pain sometimes but buy and hold because THE MARKET ALWAYS GOES UP. And buy some ETH.
I agree. I have no interest in what Dave Ramsey spews and being a mere millionaire by the ripe old age of 60. Just so I understand, I'm trying to decide whether to do long-term in URPO (or any of the levered ETFs) without any leverage when buying OR do I buy the regular VOO with 2x leverage OR do I go very aggressive and buy the levered ETF with margin 2x leverage (if that's even allowed)? Thank you
I’m pretty sure it doesn’t let you buy 3x ETFs on margin so maybe do one or the other/both. Yes, if the market crashes 30% tomorrow it would be painful but over the long term (10+ years) you’ll get bigger gains
Buffet definitely believes the market always goes up over time...though he definitely doesn't like leverage. He likes the opposite of leverage. He likes a big fat pile of cash sitting in T-bills.
Big fan of GDXU right now - 3x leveraged gold mining ETF... because, you know... money printer go brrrr and inflation
would rather just buy BTC and ETH on 1.25-1.5x leverage
Ouch, the last couple weeks have not treated you well.
+SB for Kelly Criterion reference
People who understand finance and are not completely risk averse should absolutely use margin (with some caution). Obviously it's extremely risky if you're invested in things like Tesla, biotech and the likes (both due to volatility and overvaluation), but it's perfectly manageable if you have a diversified portfolio that looks a bit like a market index. Just need to be careful to not get margin called but you can definitely have a leverage of 120% or something like that without trouble.
With that in mind multiples are really high currently and I'm not sure how comfortable I would be to go in with too much leverage from the get go. If you're confident the market isn't overvalued then you can start immediately with your 120% or whatever leverage you have in mind, but if you're not you can slowly increase it over a period of time that makes you comfortable.
Would love to hear TheBrofessors, or one of the more seasoned users, take on this approach.
Yeah lever up and put it all in SPY. No need to add extra risk by investing in one company, last thing you want is picking the wrong company, loosing your capital, and still have some debt on top. If SPY crashes worst than it did in March 2020 then your worst problem won't be having debt, but the whole world economy burning.
Odds of SPY crashing harder than March 2020 (which honestly wasn’t that bad) is zero percent unless the Fed decides to be uninvolved and fiscally responsible. They’ll prop up the market for a crash half as bad as March 2020 imo. SPY on 2x leverage is safe as fuck
Exactly. I regret not levering up to the tits in March… said to myself “if it crashes 20% more I’ll go all in”.
I still made decent chunk of money, though (inclusive of interest I paid on debt).
Hello,
I can relay you my direct personal experience in leveraged investing on my personal account.
Last year at the onset of COVID-19, I knew the markets were in turmoil but that companies with well structured balance sheets and a good competitive position would likely benefit from the pandemic or would at the least survive and valuations would grow subsequent the initial drop-off in March 2020. I immediately went to my bank and applied for the maximum available unsecured line of credit ($40K for me, given I was a recent undergrad), and then I transferred the full balance of my LOC into my U.S. Margin Trading account. From there I used the margin to only put down 30-50% of the cost on large-cap stocks I thought would do well through the pandemic, and mostly on those with dividend yields above by cost of borrowing, such as Evercore, and Canadian Tire Corp. The companies did extremely well through COVID-19, and I not only collected dividends, but also realized significant capital gains, enough to fund my startup (or a down-payment on a Toronto home had I opted for that).
The cost of borrowing was ultra-low for me on the unsecured LOC because I was an employee of the Bank, and I was only charged P+ 1.5.
I would highly recommend leveraged investing if you know what you're doing, but be careful, because there's obviously much higher inherent risk involved and you need to be able to manage the stress and emotions that comes with leverage. Only invest what you're willing to lose. I lost $15K in my first year from trading due to a lack of experience, but I learned from it and made significantly more in the long-run.
Good luck.
Illo pariatur fuga provident dolorem porro aut nihil. Omnis sed iste nisi quod nobis nihil. Aspernatur aperiam iusto quis recusandae ex. Delectus eum corrupti nemo. Quae sint quia vel perspiciatis qui ab. Expedita molestiae dicta voluptate et debitis quaerat sit libero.
Dolorum recusandae necessitatibus soluta. Ut necessitatibus aperiam cupiditate deleniti fugiat perspiciatis. Soluta magnam rerum nobis recusandae ut hic. Tempora iusto atque et voluptatem dolore quibusdam molestias. Fugiat quo quis rerum ut provident voluptatum.
Tenetur tempora veritatis deleniti illo sit fugit possimus. Ut sit temporibus in voluptatum esse quisquam. Velit numquam molestiae est inventore. Quia rerum et minus. Odit aperiam sed eum ipsum dolor libero.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Quibusdam cupiditate cumque consequatur ducimus. Minus recusandae iusto enim modi in quia illum. Laboriosam corporis et dolorem est cupiditate est cum. Ratione distinctio rem commodi distinctio temporibus. Molestiae et facere aperiam impedit sint. Illum accusamus est non quia reiciendis dolores dolorem. Minima tempora omnis itaque fugit aperiam a magnam.
Facilis est iure quia corrupti ut. Neque quia quia qui quia.
Occaecati voluptatibus dicta accusantium soluta dolores rem et enim. Sint est ut ut et deleniti explicabo qui. Eos libero possimus sed quis aperiam iusto possimus exercitationem.
Porro explicabo autem tempore rerum. Eius suscipit et qui maxime quia sit fuga voluptatem. Provident vero earum repudiandae in. Mollitia eius nihil eos sit est. Corrupti assumenda unde sunt consequatur delectus laborum. Aperiam quia est adipisci est praesentium neque.
Libero ratione et facere et tempore itaque. Voluptatum rerum qui perferendis quasi. Hic cumque earum earum ut distinctio eos tempora quis. Esse molestiae velit ad facere.