Many of you are starting to have quite sizable portfolios. I’m quite risk-averse when it comes to using debt in stock investing, and my portfolio value is around 95,000e without debt. How do others use borrowed money? Am I stupid or smart for not taking the risk? 
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No debt other than a detached house.
I have no other debt than that from my own place.
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Ten percent was still on top of equity in the spring, but I’ve brought it down to zero. Of course, I have a mortgage roughly equal to the portfolio’s value.
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Purely equity-backed investment loans make up a little over 10% of the portfolio. The Modulight and Inderes offerings are somewhat tempting to raise that to 20%.
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I have 850k€ in free leverage. Otherwise, I’m debt-free.
Since the COVID-19 dip, I’ve pretty much been all-in with a 50/50 leverage. I increased leverage as my OPO (Options Position Overlay) grew.
Now I’m taking a break; it’s too aggressive.
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All debts paid off, no stress
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10.5%, or €20k. However, I have more cash than debt, but I prefer to invest on credit when it’s so cheap. I’ll pay down the loan with cash if I have to. Otherwise, I’ll let dividends and sales reduce it.
Edit: I forgot to mention that I try to keep the leverage around 10% at least with these interest rates. When the portfolio grows and I find a good target, I’ll leverage more.
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I’ve been wondering, indeed, in the “show your portfolios” thread, there are a couple of cases where people started investing in spring 2020 and their portfolios are now over a million. No matter how much they bought at the bottom, they must have had a pretty good cash reserve in their pocket, with or without debt.
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It didn’t happen to me personally, but when I saw the impact of the 90s recession on debtors, and especially guarantors, within my circle of acquaintances, I left debt behind in the last millennium. No debt, light step.
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The idea of this thread is not to be jealous, but to be interested in how much leverage people are using…
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I have a mortgage of approx. 60k. I aim to maintain 20-30% leverage in my portfolio at all times. This would require an approx. 60% drop for a margin call to occur, but in an emergency, I could add just enough from my emergency savings or credit card to avoid a margin call. Currently, I am exceptionally trying to reduce the amount of leverage for personal reasons, not due to market conditions.
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Debt to stocks from stock portfolio max. 10%. Currently under 2%. Debt is a brother when stocks rise. A distant cousin when they fall.
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Currently, my stock portfolio has 2% leverage. I borrowed another 2% from my wife when I needed a quick loan during the spring dip. The plan is to pay off the loans once Kamux, TietoEvry, or Embracer wake up. Or by saving for three months.
81% of my home is financed by a loan. I haven’t really paid down this one at all.
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Currently, debt accounts for 0% of my portfolio, but the situation will likely change soon as my overall debt situation is becoming too good.
A working-age person should have some debt to maintain work motivation.
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I’ve been going with this Erkki Sinkko-style (Erkki Sinkko) where debt is 0€. From each account, I put 500-700€ into a few quality companies… now leverage has started to interest me…
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The loan is only against the apartment. Debt is about 18% of the household’s total capital. The apartment is included in the capital.
I still have a small amount left on my mortgage, which I’m paying off in small monthly installments while the interest rate is low. My portfolio currently has very little leverage, about 1.5%, which I can pay off immediately if needed.
Anders Oldenburg is the wisest Finnish investor I know. (Of course, this is entirely subjective.) He does not recommend a leveraged portfolio to anyone, as it does not bring risk-adjusted added value to the portfolio. In addition, he points out that companies are already leveraged to the extent that company management deems best. A bit more comprehensively here: Vko 45/17: Velka/”vaihtoehtoiset” – Seligson
Quote from the end:
"If an equity investor absolutely wants to consider leverage, I would at least recommend investing without leverage for 10-15 years first, to see how the markets fluctuate in different situations. In recent years, stock market fluctuations have been only about one-third of normal, and this should certainly not be misleading. If, based on long-term investment experience, one still wants to consider leverage, then perhaps a diversified equity portfolio can withstand 10% leverage. But I believe that for most of us, the desire to increase the risk of an equity portfolio diminishes, or at least decreases, with experience.
Everyone can get rich – as long as they are not in too much of a hurry."
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I largely agree, except for the “to anyone” part – for most people, yes. Investing solely in direct stocks is already a very risky endeavor. I don’t know how many people on this forum are familiar with Harry Markowitz’s modern portfolio theory, but let’s consider it this way.
An investor wants “better returns” but is “risk-averse.” The options involve scaling investments towards a more focused model.
Move away from MCW funds towards a factor portfolio, picking the factors they believe in. Value, SCV, profitability, and momentum, in my case. In addition, bonds are also added to the portfolio. Yes, I would much rather leverage such a portfolio heavily than invest 100% solely in direct stocks. It would only take one Alibaba with a large weighting to destroy the returns in a portfolio.
The expected return is higher than with a 100% MCW portfolio. The risk-adjusted expected return is higher than with 100% direct stocks. Personally, I don’t consider volatility a risk. I consider the risk to be not having enough money when I retire.
Quick, hazy morning thoughts expressed unclearly.
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