[nuclearnice1]

A slight over simplification, for example s&p was negative 1% per year from Jan 2000 to Dec 2009. Plus the cost of your leverage.

But the general point that US equity returns have been good and leverage would have increased them stands.

For some reason, Americans are “told” to get 4x leveraged to the real estate market but to pay for their equities with 100% cash.

[perplexion]

Because if your house goes underwater, you keep living in it for years until it recovers and grows. With leverage on equity you get margin called during drops that kill your investment and give you no capture of future recoveries.

[throw0101d]

> A slight over simplification, for example s&p was negative 1% per year from Jan 2000 to Dec 2009. Plus the cost of your leverage.

For the 2000s, a US-only investor would only have been saved from the S&P500 by having at least 20% bonds and rebalancing:

* https://www.forbes.com/sites/advisor/2010/09/13/its-not-real...

Of course if you were not US-only, but rather internationally diversified (and rebalanced), you would also have been fine. Diversification is important, even for Americans (cited sources in the description):

* https://www.youtube.com/watch?v=1FXuMs6YRCY

[nuclearnice1]

Thanks for the great video on international diversification.

I noticed he has another on the related topic of bias toward investing in one’s home country.

https://youtu.be/qYedjI03Q0g?si=-wOqSA96cmScFInq

[toomuchtodo]

> For some reason, Americans are “told” to get 4x leveraged to the real estate market but to pay for their equities with 100% cash.

Your mortgage is fixed for 15-30 years (depending on mortgage product), and your real estate cannot be margin called (unlike securities which are constantly fluctuating in price).

Edit: Over leveraging on margin to buy equities? Not great. Borrowing against real estate equity to invest in equities, with rent comfortably covering the debt servicing? Potentially not as bad. TLDR Manage your risk exposure appropriately.

[traviswingo]

This reply cannot be understated. Those who are strong advocates for highly leveraged equity positions who use real estate to justify either have yet to experience a true market decline, or are simply really green to investing.

If I could leverage 4:1 on the total market index using a fixed 30 year loan without the ability to force a sale I would in a heartbeat. Unfortunately, that’s just not how it works.

And anything claiming to be the solution to that (like a leveraged ETF such as UPRO), suffers from volatility decay that causes it to underperform or eventually go to zero in horizontal markets (e.g. lost decades).

[ldjkfkdsjnv]

Yup. You cant get margin called on a mortgage, but theres clearly an optimal S&P leverage ratio, and its far above 1. Wild how repulsed americans are by this, when they really could retire much younger

[ambicapter]

Where do you recommend we can read more about this?