Comments on: Leveraged Investing is a Risky Business http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/ Helping you invest and prosper Sun, 12 Feb 2012 00:54:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Garth Turner’s Dodgy Advice | Canadian Capitalist http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-501830 Garth Turner’s Dodgy Advice | Canadian Capitalist Thu, 28 Apr 2011 14:41:11 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-501830 [...] This advice is so bad that I don’t even know where to begin. First, an 8% expected return from a balanced portfolio is not very likely at a time bonds are yielding 3%. Second, it doesn’t make much sense for anyone to borrow short at 3% and lend long at 3%. Third, holding bonds in taxable accounts is terrible when Al also has $200,000 is his RRSP account. Fourth, home equity is not “non-performing” when the owner is living in it (and not paying for the privilege). Fifth, borrowing against a free-and-clear property is not “diversification”; it is leverage. [...] [...] This advice is so bad that I don’t even know where to begin. First, an 8% expected return from a balanced portfolio is not very likely at a time bonds are yielding 3%. Second, it doesn’t make much sense for anyone to borrow short at 3% and lend long at 3%. Third, holding bonds in taxable accounts is terrible when Al also has $200,000 is his RRSP account. Fourth, home equity is not “non-performing” when the owner is living in it (and not paying for the privilege). Fifth, borrowing against a free-and-clear property is not “diversification”; it is leverage. [...]

]]> By: florch http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33484 florch Sat, 05 May 2007 01:48:05 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33484 I can agree with that. I wouldn't advise it to someone who didn't have at least a solid layman's grasp of personal finance, and moderation is the key. It would be crazy to be so far leveraged that a market downturn or a job layoff could wipe you out. cheers, have a great weekend I can agree with that. I wouldn’t advise it to someone who didn’t have at least a solid layman’s grasp of personal finance, and moderation is the key. It would be crazy to be so far leveraged that a market downturn or a job layoff could wipe you out.

cheers, have a great weekend

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33449 Canadian Capitalist Fri, 04 May 2007 22:03:20 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33449 florch: IMHO, leverage works much better with rental properties because (a) it is a pain to sell (b) finding a deal is much easier because so few people are looking (c) real estate, by its very nature, is more risky (and more rewarding) than bonds and less risky (and less rewarding) than stocks. You seem to know what you are doing: moderate leverage with an awareness and willingness to take on the risk. How many people are like you? In my opinion, the vast majority are rather poor investors and would be better off not taking any more risk. florch: IMHO, leverage works much better with rental properties because (a) it is a pain to sell (b) finding a deal is much easier because so few people are looking (c) real estate, by its very nature, is more risky (and more rewarding) than bonds and less risky (and less rewarding) than stocks.

You seem to know what you are doing: moderate leverage with an awareness and willingness to take on the risk. How many people are like you? In my opinion, the vast majority are rather poor investors and would be better off not taking any more risk.

]]> By: florch http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33432 florch Fri, 04 May 2007 19:13:55 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33432 Canadian Dream: re: family. Me too, they're my greatest motivation and money is secondary. I feel I'm doing this for all of us. My job is the golden handcuffs. Sometimes I'm gone too much, so a chance to walk away a bit early by investing well is very important to me. Canadian Dream: re: family. Me too, they’re my greatest motivation and money is secondary. I feel I’m doing this for all of us. My job is the golden handcuffs. Sometimes I’m gone too much, so a chance to walk away a bit early by investing well is very important to me.

]]> By: florch http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33431 florch Fri, 04 May 2007 19:08:56 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33431 CC...with Canadian banks providing a 2% dividend plus 13% average capital gains growth over the last decade, it's more than possible, diversify from there. My job pays enough that I can pony up the 2% shortfall and wait it out for the long run. I greatly respect your opinions on this blog but guess we'll agree to disagree on this one. Plus I know Ed is selling something - doesn't mean he's wrong, even though my portfolio looks more like yours - no high MER mutuals thank you. My parents retired on real estate rentals, and they're the first to say that if you could see the score (in terms of capital gains growth) there were many years they didn't win, but they won in the end. I see the stock market as real estate without the PITA factor and the bonus of liquidity - you just don't need to leverage as high to get a decent ROI. As smart as you are and as hard working as you are, your portfolio would kick butt leveraged over 20 years. Risk+Work+Time=Reward CC…with Canadian banks providing a 2% dividend plus 13% average capital gains growth over the last decade, it’s more than possible, diversify from there. My job pays enough that I can pony up the 2% shortfall and wait it out for the long run. I greatly respect your opinions on this blog but guess we’ll agree to disagree on this one. Plus I know Ed is selling something – doesn’t mean he’s wrong, even though my portfolio looks more like yours – no high MER mutuals thank you.

My parents retired on real estate rentals, and they’re the first to say that if you could see the score (in terms of capital gains growth) there were many years they didn’t win, but they won in the end. I see the stock market as real estate without the PITA factor and the bonus of liquidity – you just don’t need to leverage as high to get a decent ROI. As smart as you are and as hard working as you are, your portfolio would kick butt leveraged over 20 years.

Risk+Work+Time=Reward

]]> By: Financial Jungle - » To Leverage Or Not? Take The Middle Of The Road http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33419 Financial Jungle - » To Leverage Or Not? Take The Middle Of The Road Fri, 04 May 2007 17:44:48 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33419 [...] on a very sensitive topic: leveraged investing. To read more on the lively discussions, check out The Canadian Capitalist and Million Dollar [...] [...] on a very sensitive topic: leveraged investing. To read more on the lively discussions, check out The Canadian Capitalist and Million Dollar [...]

]]> By: MillionDollarJourney.com http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33329 MillionDollarJourney.com Fri, 04 May 2007 10:08:16 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33329 Mike: I find it refreshing to see various opinions about financial issues, especially from those who work in the field of finance. So, as you said, I like providing different opinions and discussing them. FT Mike: I find it refreshing to see various opinions about financial issues, especially from those who work in the field of finance. So, as you said, I like providing different opinions and discussing them.

FT

]]> By: Canadian Dream http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33251 Canadian Dream Fri, 04 May 2007 03:01:37 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33251 Mike - I have to admit I could see CC hitting the keyboard with a bit more satisfaction that normal with this post. *grin* As for the entire idea that equities are the only path to wealth. Depends how you define wealth. I don't want a $1,000,000 to my name. I rather roll around on the floor with my family in a mad game of tickle each other and be completely happy for even just a few minutes each day. CD Mike – I have to admit I could see CC hitting the keyboard with a bit more satisfaction that normal with this post. *grin*

As for the entire idea that equities are the only path to wealth. Depends how you define wealth. I don’t want a $1,000,000 to my name. I rather roll around on the floor with my family in a mad game of tickle each other and be completely happy for even just a few minutes each day.

CD

]]> By: Nord64 http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33245 Nord64 Fri, 04 May 2007 01:24:20 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33245 My opinion is, that leverage used correctly is a great way to build wealth. Risk can not be taught by others it has to be personally experienced to find once on comfort/risk level. I personally can't hold a mortgage of +300k, but I have little hesitation to borrow this amount of money to invest in to quality investments. I prefer the stock market over real estate with it's extremly high commissons and inherent illequidity. But....there are good times and bad times for leverage. In May 2003 it was a no brainer (in my opinion) to pick up RY and XIU with borrowed money, the dividend almost coverd my PLC interest payments at that time. I just waited. I work with people that recently bought houses with little down and a huge (400k) mortgages...that is risky to me. I lost sleep for three nights when I bought my house 10 yrs ago because I had to borrow 75% of the purchase price. How would I ever pay back all that money? :) Just my 2 cents. N64 My opinion is, that leverage used correctly is a great way to build wealth. Risk can not be taught by others it has to be personally experienced to find once on comfort/risk level.
I personally can’t hold a mortgage of +300k, but I have little hesitation to borrow this amount of money to invest in to quality investments. I prefer the stock market over real estate with it’s extremly high commissons and inherent illequidity. But….there are good times and bad times for leverage. In May 2003 it was a no brainer (in my opinion) to pick up RY and XIU with borrowed money, the dividend almost coverd my PLC interest payments at that time. I just waited.
I work with people that recently bought houses with little down and a huge (400k) mortgages…that is risky to me.
I lost sleep for three nights when I bought my house 10 yrs ago because I had to borrow 75% of the purchase price.
How would I ever pay back all that money? :)
Just my 2 cents.
N64

]]> By: Mike http://www.canadiancapitalist.com/leveraged-investing-is-a-risky-business/#comment-33233 Mike Thu, 03 May 2007 23:15:26 +0000 http://www.canadiancapitalist.com/2007/05/03/leveraged-investing-is-a-risky-business#comment-33233 MDJ, I'm kind of curious as to why you post Remple's stuff on your blog? Do you believe in his methods or are you trying to provide a forum for different opinions? MDJ, I’m kind of curious as to why you post Remple’s stuff on your blog? Do you believe in his methods or are you trying to provide a forum for different opinions?

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