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It is the percentage of return up or down that is magnified with leverage. Dollars lost or gained stay constant .
It depends on what variables you hold fixed as you increase leverage. If you hold equity fixed, leverage does magnify losses due to owning more assets. If you hold assets fixed and magnify leverage by borrowing and then stuffing the loan money under your mattress, then losses are not magnified.
Actually that borrowed money in the mattress is subject to magnified purchasing power loss due to inflation so real returns would be magnified. Putting 10k of your own money and 10k borrowed money in the mattress has 20k losing buying power. That effects your real return by 2x
Actually that borrowed money in the mattress is subject to magnified purchasing power loss due to inflation so real returns would be magnified. Putting 10k of your own money and 10k borrowed money in the mattress has 20k losing buying power. That effects your real return by 2x
See, you've already confused a mattress for real estate! I can imagine a homeless person selling you a nice one bedroom by the park! Don't quit your day job.
See, you've already confused a mattress for real estate! I can imagine a homeless person selling you a nice one bedroom by the park! Don't quit your day job.
You have still not defined exactly what variables you hold fixed as you vary leverage.
You have still not defined exactly what variables you hold fixed as you vary leverage.
Variables are exactly the same except I use or don't use leverage. The statement was leverage magnifys losses. Not leverage PLUS some changed variables.
Surely idiotheft5 Will come along soon and clear this up with detailed calculations.
Variables are exactly the same except I use or don't use leverage. The statement was leverage magnifys losses. Not leverage PLUS some changed variables.
Surely idiotheft5 Will come along soon and clear this up with detailed calculations.
Impossible. You cannot simultaneously have net portfolio value (equity) and total invested assets (debt + equity) constant, if leverage is being varied. Which is being fixed, total assets or equity?
Impossible. You cannot simultaneously have net portfolio value (equity) and total invested assets (debt + equity) constant, if leverage is being varied. Which is being fixed, total assets or equity?
Do you even understand what you are trying to say. I explained in my previous post. The question is how does my using leverage magnify my loss? If you want to cloud the issue with a bunch of "what ifs" have at it.
I say it does not magnify loss and have asked those that are insistent that it does to provide their calculations. Hmmm. Crickets.
Do you even understand what you are trying to say. I explained in my previous post. The question is how does my using leverage magnify my loss? If you want to cloud the issue with a bunch of "what ifs" have at it.
I say it does not magnify loss and have asked those that are insistent that it does to provide their calculations. Hmmm. Crickets.
I asked a simple question: Are you holding equity constant, or equity + debt?
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