Employing leverage in your investments can be a good thing. The path towards the upper middle class in industrialised countries is paved with mortgages and university diplomas. Buying a house with leverage (i.e. a mortgage) allows people in the UK and elsewhere to not only get a home but to build substantial wealth over time by paying down the mortgage. Once retried, the house in the city or the suburbs can be sold in favour of a smaller home in the countryside. Surplus equity then makes for a nice nest egg. Similarly, student debt enables young people in the US to finance a university degree that leads to higher lifetime income through better-paid jobs (that is, of course, if you do not study critical philosophy as my wife did…).
Leverage and the disposition effect
Leverage and the disposition effect
Leverage and the disposition effect
Employing leverage in your investments can be a good thing. The path towards the upper middle class in industrialised countries is paved with mortgages and university diplomas. Buying a house with leverage (i.e. a mortgage) allows people in the UK and elsewhere to not only get a home but to build substantial wealth over time by paying down the mortgage. Once retried, the house in the city or the suburbs can be sold in favour of a smaller home in the countryside. Surplus equity then makes for a nice nest egg. Similarly, student debt enables young people in the US to finance a university degree that leads to higher lifetime income through better-paid jobs (that is, of course, if you do not study critical philosophy as my wife did…).