Using leverage responsably for long term personal investing
Based on a recent thread about levered ETFs - Is there a way to use leverage in a responsible manner to optimize long term returns? Not looking for short term trading strategies, mostly looking to see if there longer term approach to use leverage to optimize a multi-asset personal portofolio. For added context I have a WM account with UBS/MS that holds equity ETFs and is rebalanced a couple times a year. Im fairly young, dont plan to use the funds for a while, and have high risk tolerance.
Wouldnt ask an FA because they face asymmetric returns when recommending riskier strategies to clients.
You can't really get gains long-term using a leveraged ETF. Because the losses are also magnified. And losses hurt an ETF more than the gains will gain. However, you can use short day/swing trading to profit.
https://www.investopedia.com/articles/financial-advisors/082515/why-lev…
Read this article before you put any money behind a leveraged ETF.
The easiest way for a retail investor to use leverage long-term is to put a downpayment on 4-5 houses and then rent them out to cover the mortgage. Great anti-inflation vehicle because you can always increase rent. In 30 years you will own 4-5 houses for the price of the down payment and maintenance fees. At this point you are either cash flow positive, or you cold sell the houses as 3x-4x what you paid. Of course, it is easier said than done, but it is a tried and true way for normal people to make a few million by the time they hit 55-60.
The best way to do something like this is through options - whether by buying LEAPs on positions or maybe using deep in the money options where you can effectively get leveraged exposure. They cut both ways, of course, but they will at least give you some chance of a good outcome vs. buying a dirixeon (or however you spell it) 3x bull or bear etf.
Outside of that - the answer is not really. The real estate comment is a great one - that is something you should look into. But aside from that type of asset play, I'd avoid leveraging a long term portfolio of ETF's.
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