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Comment by MK999 | Hacker News Reader

Approaching 40 and starting to think the secret is smart people buy real estate with the banks money and pay it back with renters, and the rest of us work for a living.

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You can skip the hassle and buy leveraged index funds. The risks & returns are similar.

you may have missed out on "the banks money" part

Leveraged index funds borrow money from banks and invest it. For example if you invest $100k in a 3x fund, it will borrow an additional $200k (from banks) and invest it. Each day it will be rebalanced to maintain the 3x leverage.

Who repays the loan if the index crashes?

Who repays the loan if the housing market crashes and the tenants walk away?

From what I recall of the "leveraged" financial products I've seen. The magic is that you get leverage*returns if it goes up... but you lose ALL your money if it goes down.

I'm not saying that's how these index funds work, I don't know. Just beware of anything leveraged.

Though one issue with most leveraged ETF/ETNs is how they aim to replicate the daily return of the index. So by holding it longer than a day, your returns are path dependent.

So if you are holding the leveraged ETF for a month and the index has a positive return, it is still possible for you to have a negative return.

It's worth noting here that if your plan is to buy and hold, it's probably not in your interest to buy leveraged index funds. The high expense ratios combined with far below-market returns in the case of volatility make them a poor choice (http://www.investopedia.com/articles/financial-advisors/0825...).

Don't do it anytime soon - we're heading into a down market.

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