Barbara Kiviat has a Q & A with Ian Ayres and Barry Nalebuff, who took their paper why young people should buy stocks on margin, and has made it a bog.Jeg liked – and still like – the basic idea here where Nalebuff sloganizes very good: Another way to say it is we believe in stocks for the long run, but most people when they have lots of stocks have no long-term and have the long run has plenty of bestandene.Hvad I do not know is the practical mechanics of doing this: Ayres: It's a good question. If two-to-1 is great, why not go for three-to-one or 4-on-one? The answer is, the cost comes in the wake becomes too expensive. One of the great pieces of news in this book is that it's really cheap to borrow money to take levered positions in stock at a 2-to-one rate. But if you go beyond three-to-one, it becomes too expensive to borrow money … Over the past 138 years, was a wholesale lending rate for margin loans just 0.34 percentage points over T-bill rate. Do not do it from Vanguard or Fidelity – they do not have competitive margin rates. But if you shop around places like Interactive Brokers, you can basically borrow very close to the T-bill rate if you live in a 2-to-one basis.Nalebuff: It is also possible to do this through long-term opportunities. Ideally, this idea catches on, and there will be funds to do it for you. Today there are a couple that Ultra Bull Fund from ProFunds.Der is a lot not to like here – starting with the idea of 20-year-old opening margin accounts at Interactive Brokers, and continued with the fact that things like Ultra Bull Fund have a tendency to to underperform the stock market even when the stock market is rising. When I first wrote about this idea, I quoted John Waggoner, who pointed out that over the past five years, Ultra Bull Fund was established 8.8% while the S & P 500 was up 18.6%. It was In April 2008, when the Ultra Bull Fund were traded at around $ 60 per share. Since then fell to below $ 15, it is still below $ 40. The fund has high fees and what is more, it exacerbates the fact that stocks are volatile, and that if you go down 10% and then up to 10%, or up to 10% and then by 10%, you will end up with lower than where you started. Although I like the idea of adding a bit of leverage to your portfolio when you are young, I do not like the idea of making it through an ETF like this and I am very concerned that Nalebuff is to quote the as a mulighed.Mere generally the amount of discipline you need to prosecute this strategy is absolutely enormous, and people tend not to be particularly financially disciplined, especially when they are young. They will abandon buy-and-hold strategy in exactly the wrong time, selling low and then buy back in at the high points, they will start using their margin account to try to pick stocks or trading options, they will use any surplus expenses instead of keeping it invested and let them sammensatte.I meantime, of course, Wall Street institutions to let you borrow on margin will encourage you to do all these things while being as hard as possible for a 20 – something to get something close to "wholesale lending rate for margin loans." I have not read the book, and so I do not know how much detail it goes over really doing this in reality. But if the best that the writers can come up with is a strategy of buying and rolling over deep-in-the-money LEAP call options, I would not recommend it to all but the very financially sophisticated. Who is probably going to make lots of money during their lifetime alligevel.Update: David Merkel adds good ting.Og what? Why worry about this? Why bother to fact-check apparently harmless allegations of money? For some people it may not matter. But as I try to build a comprehensive financial philosophy, it is important to know that I base my belief in reality and not a bunch of conventional wisdom. I learn to question the assumptions that I have kept a long time. Not all of them are korrekte.For example, like most Americans I used to think that real estate always appreciated. As we have seen over the past five years, but it's just not true. (In fact, in the long term, both gold and real estate relatively poor investment, barely offer any return above inflation.) I recently interviewed my followers on Twitter (both @ and @ jdroth grsblog accounts) for other examples of money myths that intelligent people should question. Here are some of the more noteworthy responses: Several readers dislike the idea that "debt is a tool" or that "you need credit." You can live in a modern world without credit, even though lots of people will try to convince you, it is impossible. @ Ericabiz said: "The worst one: When people think that being poor somehow virtuous, and rich = evil or take advantage of others. It is widespread. "@ Mile73 said something similar:" If someone has 'a lot' of money, it could not be because they worked hard to get that. It must be because they lucked into it. "These myths are most succinctly stated by @ budgetsaresexy who wrote that he does not like the idea that" Money is too greedy people. "I agree. It is not wrong to be rich, folks. Money is not a bad ting.På a related note, many readers complained about the famous biblical quote, "Money is the root of all evil." They pointed out that it is the love of money is dealt with the root of all evil . @ Crunchysue think it's a myth that "You can plan your salary rise in your life." This underscores how statistics can be deceiving. In general, salaries overall are likely to increase with time. But that does not mean your salary will always rise. It is important that the budget of what you actually earn, not what you hope to earn in the future. @ Mile73 do not like when people say, "There is no point in saving. You can get sick and lose it all. "This one bugs me too. The whole "you can not take it with you" mentality. Just because you might get sick, and just because you can not take your wealth with you when you die, it does not mean you should not save. Balance, people, balance! @ Extreme Jacob does not like the myth that frugal is the same as cheap. He may not like the fact that most people measure living standards in terms of expenditure and forbrug.En some readers hate the popular belief that buying a home is always better than renting. As we saw recently, sometimes renting makes sense. @ Chicagoelevated wrote that she is fed up with the idea that if you're doing what you love, the money will follow. She is pursuing a career in something she is passionate, but she has seen first hand the hard work is not always profitable. (Still, I think it is too bad to put up with a job you hate just to get a fat paycheck.) @ Credit Goddess wrote: "I dislike: 'A bad credit with you for life. 'Sure, if you do not change habits, but it will improve if you work at it. "More people hate shopping" myths ". @ Ambermae hate, "The more you buy, the more you save." @ Money Highway agree, like @ weathershenker noting that if a sign says "save 15%", you will spend 85%: "Sales may be good, but if you really want to save, do not use! "Great rådgivning.Et couple of other people dropped me notes via email. For example, Claire wrote: When I was in college, I found out what a bunch of bull "You will appreciate it more if you pay for it yourself" was. I was so lucky to not have to borrow, but I saw close friends struggle with paying for education because they had no support. We all appreciated our education on an equal footing. I did not screw around & the party and lose my apartment at college, not even my venner.Tænk for you selvDet has been a long speech to make a simple thing: Do not just accept conventional wisdom, and not blindly heed the advice of financial "experts". Listen to it here, safe, and consider it. But think for yourself. Do your own research. When you hear someone claim – even if it is someone you trust – to seek independent verification before you make life decisions based on information.Gør this to blogs (including this), but also do it for books and periodicals . The more you learn, the better you will be able to spot errors and fallacies and situations that do not apply to you. You will also find it easier to question the sources that you once considered autoritative.Husk: Nobody cares about your money than you do. If you do not take the time to double-check the financial advice you receive (in person, in books and blogs), then there is a good chance you'll end up in financial trouble. Be smart and look for you selv.Hvad do you think of the money myths that I have mentioned here? Are they myths? What myths bug you most? Have a money myth ever led you into financial problems? (I suspect that a lot GRS readers have been hit by "your home will always increase in value" myth.) And most of all, how can you learn to separate fact from fiction? This article is about choices, gurus, Odds and ends Tuesday, April 27, 2010 (by JD Roth)
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