Is leveraged index investing ever a good idea with a low amount of leverage (e.g. 1.25 leverage ratio or so)?

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Charles J. Stevens, Principal, evergreen financial, LLC

@CharlesStevens • 03/14/16 This answer was first published on 03/14/16. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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I have no philosophical problem with leveraged investing: what I do have a problem with is using any kind or amount of leverage if you are not financially able to keep the position due to a lack of colateral. Many novice traders get in trouble because they take on a leveraged position without having sufficient funds to meet margin calls if their strategy is poorly timed (putting on a long leveraged bullish S&P 500 position in January of 2016) and being forced to liquidate when the market moves against them. This is particularly true in the futures markets.

And if you're thinking of doing this for example with leveraged ETF's, my personal opinion is that leveraged ETF's may be good for very short term trades, but I would not leverage a leveraged ETF EVER!

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