February 11, 2009, 7:05 am

The Perfect Timing For Leveraging The Market

by: The Financial Blogger    Category: Leveraging Strategies
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Oh man, Oh man Oh man. I will start this post with a big disclaimer note: I am not telling (influencing, forcing, giving you a hint on the market) you to do what is written in the following post. This is my humble opinion and my financial thoughts are as good as yours. So please don’t blame me if you do anything with your money 😉

However, I still believe that this is the perfect timing to leverage in order to benefit from the low stock market. Why?, here’s why:

Very low interest rates

This probably once in a lifetime as interest rate across the world is at its lowest. You can basically borrow money for free ;-). In Canada, if you have been fast enough when I was telling you to get the biggest line of credit possible while the rates were low, it is possible to borrow for 3%. This is what you can get from a Home Equity Line of Credit. While HELOC’s are seen as the product of greed, I can tell that people paying 3% right now are laughing 😉

Unfortunately, if you just wake up and run to the nearest banks, they will more likely offer you a P+1 HELOC. This is still not bad since you will borrow at only 4%.

The stock market is filled with opportunities

Yeah, you have been hearing the same old track over and over again by financial advisor. Hey, you know what? You hear it because it’s true! Peter Lynch beat the market for 13 years and 50% of the investors that purchased his mutual fund lost money. How come? They sold during rough times and bought more during good year on the market 😉

Well stop listening to your instinct, humans have not been made to trade the market 😉 This is the job of your money only 😉 You don’t believe in mutual fund managers? Can’t blame you as 7 out of 10 don’t beat their index 😉 However, there are index funds and ETF’s which are pretty cheap and guarantee you to be very closed to the index.

Do you really think you can’t create more wealth than 4% on your investment?

You don’t want to invest in the stock market? That’s fair. But it doesn’t mean that you can’t create more wealth by borrowing money. If you have liquidity, you may be able to purchase a rental property and build a strong equity in it since mortgage rates are pretty low. Buying foreclosure properties could be a great alternative to the stock market.

On the other side, you can also start a small sideline and as long as your efforts translate into a return of 4% per year, you are in a good position to create more wealth and improve your net worth.

I personally setup my personal finance so I can access a huge line of credit at a very low rate. I do a smith manoeuvre and increasing my number of shares every month through a systematic investment plan. Then, I took 7K to invest in my own company.

Since the latest has been growing steadily since its creation back in March 2008, I am already covering my interest cost from all my leveraging strategies. When the market will come back, I guess that people will tell me that I am lucky 😉

So you can sit on the bench or pull your helmet and go on the field!

Leverage is a CFD advantage

CFDs offer traders four main advantages. Leverage allows traders to use a fraction of the cost to trade stock. Shorting allows traders to profit from declining prices. CFDs commissions are generally competitive. And a well placed stop loss can limit a trader’s risk.

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