As a novice investor, I'd like to know peoples opinion on using margin loans and leverage in the stockmarket.
Essentially, can leverage be used successfully in the long term with minimum risk?
The reason I ask is this:
1. I haven't heard many stories about making a lot of money from using margin loans, except the examples that margin loan marketing provides. However, I've heard a lot of stories about people losing a lot of money from using margin loans.
2. I saw a Warren Buffett interview the other day. He said something along the lines of “Stay away from leverage. Nobody ever goes broke that doesn’t owe money.” and "If you’re smart you don’t need it, and if you’re dumb, you got no business using it."
3. I'm thinking if you only gear conservatively, lets say for interest sake approx 25-35% LVR you're pretty safe right? But you still need to outperform interest to make it all worthwhile. So is the trouble worth it?
Just interested in peoples thoughts
NB: just to clarify i'm only talking about leverage into the stockmarket and equities, not property.