Nanozine wrote: Mon Oct 27, 2025 5:21 am
Thank you both for all the detail. I’ve decided to stay away from leverage for now and have just went with the simple option of A200 and BGBL for now at ~30/70 ratio. I am looking to diversify by adding a global small cap or developing markets ETF at some later date; currently looking into DGSM, AVTS or VGE.
I don’t know the tickers, but I am guessing 30% Australian stocks, 70% global? That’s fine. I would not be more in Australian stocks than that.
On Emerging Markets, Australia’s own stock market and economy have a lot of exposure to emerging Asia — all those mining & natural resources companies, plus to some extent financial companies. I am not sure an Australian needs to have more EM exposure in their portfolio.
May still look into the leveraged ETFs a bit more; as far as I’m aware it does seem like a relatively low leverage ratio (~30%) can boost returns in the long term while mitigating the risk of a crash forcing a margin call. Would it make sense to switch over to something like GHHF during a bear market? I have heard that an early drop can have an oversized impact on the long term returns. At the same time I’m not sure if this is just loss aversion
All of this just sounds so very, very not a good idea.
Leveraged ETFs only track short term market moves. They don’t track long term ones. You’d have to read all the threads here about this, but they don’t do what people think they do. That was my conclusion from skimming them.
If you are reading investors who talk about using leverage, then you better be careful — I would argue you are reading in the wrong places. It’s a bit like dating: men habitually overstate their success, women habitually understate it (in my experience). You can bet people using leverage only tell you about their wins, and people who lost money keep their mouths shut.
You can buy Call options on the market (LEAPS in the USA, on the S&P 500). But you are paying the time value – and you can wind up with loss of whatever you spent. But that’s the only kind of leverage I think a retail investor should engage in — if you buy options (as opposed to writing them) then your downside is limited by the amount you put in (however you are normally marked to market, perhaps daily. You have to put more collateral in if the contracts are going against you; at least that’s definitely true if you have written an option).
GHHF I do not know? Let’s say this. If you have the guts, in a bear market, to leverage up and buy, then good on you, mate (adopting my awful impression of an Austraaalian accent). Suffice it to say when you buy stock or funds, and the next thing that happens is it falls another 10% in value, this is not an easy thing to keep doing. Calling the bottom of a bear market is no easy thing. It’s easy now to say that March 2020 or April 2025 were “no big thing”. But at the time — we didn’t know how bad things would be under Covid or that we would so quickly find working vaccinations. And we didn’t know (don’t, in fact) what the consequences of tariffs will be. And those were only -20-30% drops. Wait til it’s a -50% drop. Or one that goes on for nearly 3 years (2000-03) or, heaven forbid, 30+ years (Japan).
If you blow your capital early in your investing career, you have blown your capital. You won’t necessarily be able to climb out of the hole. Equities are risky enough without compounding the problem.
I don’t know what the interest rates and repayment terms are on your loan. But borrowing money to basically gamble on equity returns? Even though equities are a pretty good bet in the long run, that doesn’t feel good to me.HECS is indexed based on the CPI and you begin to pay it back once you reach certain income threshold as effectively an additional income tax. It is calculated using your pre-tax income but the payments are not tax-deductible. The first threshold is 15c every dollar over 67K AUD regardless of your actual amount of debt, you just need to pay it for longer if you have more. As far as I’m aware there isn’t a case in which you’re forced to pay this back as a lump sum. I have seen cases of people being overpaid by Centrelink (our social security and the provider of the loan) due to eligibility issues and owing large amounts of money on reddit, but I don’t believe that applies here as I don’t think there’s an opportunity for them to overpay or for me to suddenly become ineligible.
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Well the UK student loans are inflation + a percentage. Some of them are at 3% real. Basically it’s a tax people will be paying, possibly for their entire lives. 9% of salary above a certain level.
Borrowing more money from the government, not to pay for education but to invest, seems:
– not entirely ethical (although I realise people do it)
– fundamentally a way of digging yourself further into a hole. In the UK, when you apply for a mortgage or other consumer loan, they consider your student loan payments in assessing how much you can borrow. So it hampers your credit
If you were using this money to start a business, I am all for entrepreneurship. But to punt it in the markets?
I don’t mean to patronise you. It’s simply I have been investing for over 40 years (not always wisely). And investing is this game where if you can hang in for the long term, you are likely to do very well. And I mean 30 years, not 10. If you get thrown off the horse before that time, there’s every chance you’ll never get there. Leverage is a sure way to magnify your losses.
I’ve got no excuse. I read Burton Malkiel’s A Random Walk Down Wall Street over 40 years ago. But I didn’t put its dictums into practice until after 2003. You have the advantage of having the walking wounded of investing, such as myself, to tell you how it can play out.
When I began my career I worked with people who had built up huge loans to support investments which had then crashed (in those days, it was commodities, typically). Then there was the Crash of 1987, when the market dropped -30% over 2 days. People who had leverage got killed. Then later when I was in business school I had classmates who had leveraged up to buy tech stocks, and ridden the crash down post 2000.
