Leverage: Fast Fortune or Failure

Talking Real Money - Investing Talk

Don McDonald

Business, Education, Investing, How To

4.2 • 680 Ratings

🗓️ 28 April 2025

⏱️ 22 minutes

🔗️ Recording | iTunes | RSS

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Summary

Don and Tom dive into the seductive but dangerous world of leverage, starting with real estate and quickly moving into the even riskier territory of leveraged ETFs. They explain how leverage magnifies both gains and devastating losses, using real-world examples like the Direction 3X Treasury Bull and Bear funds, which either crushed or annihilated investor money. They caution listeners that these “extra touchy” funds are pure speculation, not investing, and explain why most people should stay far away. The episode wraps with smart listener questions on direct indexing, Roth rollovers, and the hidden risks in trying to beat the market on your own. 0:04 How leverage props up real estate and investing myths 1:32 The dark side: Leveraged funds and massive losses 2:49 Triple leverage dangers: 90% losses vs. 266% gains 5:38 Long-term performance: both leveraged bulls and bears lose 7:52 Even treasuries show wild volatility with leverage 9:57 Why leveraged funds are pure speculation, not investing 11:44 Risk explained through standard deviation comparisons 14:16 Listener question: Direct indexing vs. S&P 500 returns 17:44 Listener question: Roth 401k rollover to Roth IRA tips Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Oh, that's my prime delivery.
0:01.6	What, already?
0:02.7	Only one thing can match the buzz of Prime's fast delivery.
0:06.2	And that's the buzz of Prime's entertainment.
0:09.0	What are we watching?
0:09.7	Heads of state, that new action comedy with Idris Elber as the Prime Minister,
0:13.3	John Sina as the president, and Prianka Chopra Jonas,
0:15.9	as their only hope.
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0:18.2	From fast delivery to explosive entertainment, it's on Prime. For only
0:23.0	$899 a month, join now. Content includes limited ads, subscription or to renews. For more information,
0:28.2	go to amazon.com.uk.U.K. slash prime.
0:35.0	Reality for a really great future.
0:38.0	We're talking real money.
0:39.7	One of the biggest reasons why all of these podcasts and all of these get rich quick schemes and people like rich dad, poor dad, Kiyosaki dude,
0:52.2	one of the reasons that they all flog this one way of getting rich
0:56.8	in real estate is because of the power of a thing called leverage, a crazy little thing called
1:05.1	leverage. It's because particularly in real estate, leverage is used heavily in real estate. It is
1:10.8	not used as heavily in other forms of
1:13.2	investing uh but in real estate people often buy with you know no money down or low money down or
1:21.3	you know then when you buy a house maybe you have to put 20 percent down to get no PMI but
1:25.3	you still don't have much in the property. You've got 80%
	...

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