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by anameaname 2942 days ago
In Item 10 it says:

> One study I remember showed that young investors should use 2x leverage in the stock market, because – statistically – even if you get wiped out you’re still likely to earn superior returns over time.

And the linked paper says:

> The mistake in translating this theory into practice is that young people invest only a fraction of their current savings, not their discounted lifetime savings. For someone in their 30's, investing even 100% of current savings is still likely to be less than 10% of their lifetime savings

This makes a lot of sense to me and says what I haven't been able to about my own risk tolerance. What is OPs counter to this? That the paper's conclusions are flawed, or that no 20-something could execute it?
2 comments
jplewicke 2942 days ago
Someone actually tried to follow this advice starting in September 2007: https://www.bogleheads.org/forum/viewtopic.php?t=5934 . Needless to say, it did not work out well for them and they almost went bankrupt due to spiraling margin debt.

The difference between a mortgage and margin debt is that mortgages aren't constantly marked to market, and you can continue to own the house even if you're temporarily underwater on the mortgage. Whereas with margin, you can be forced to sell if the value of the assets you've bought underperforms.

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anameaname 2942 days ago
The paper that was linked suggests using derivatives rather than directly taking out loans, which are financially convertible. Specifically it says buying deeply ITM call options for several years out strike date.
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selestify 2942 days ago
> For someone in their 30's, investing even 100% of current savings is still likely to be less than 10% of their lifetime savings

What does that mean? Isn't the point of compound interest such that the more you invest early on, the more you'll get back decades down the line?

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krageon 2942 days ago
If I read it correctly, it means that 90% of a person's savings are made after their thirties. So if you invest all of it in your thirties, you've captured 10% of your lifetime savings in your investments.
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