5. What is Leverage? - savingandinvesting.com

[SuicidalSP]

Move to England and teach accounting over here, PLEASE.

[blleeed]

thank you for this video!!

[CMPNJ]

Thank you so much for the layman's definition. After hearing you explain it, the concept is actually quite simple. All the other explanations I found were so bogged down in jargon that it can become difficult to fish out the practical meaning. Cheers!

[uncontrolable97]

thanksssssssssssssssssssssssss­ssssssss I never understood what it meant

[bonfirejovi]

How do central bank policies of low interest rates and providing extra credit into the market contribute to leverage? More specifically would banks accept such small down payments on the mortgages taken out if the fed funds rate had not been so low?

Also regarding your example, if the price had gone down to $80 then then that would be no different than the price going down to $90 as we had still have $0 and still owe $90 in both cases... am i correct?

[savingandinvesting]

@bonfirejovi Low interest rates contribute to leverage primarily by making debt more affordable - I can afford to pay interest on twice as much debt if interest rates are half as high for example. With lower mortgage rates (which are longer term rates), people can theoretically afford larger houses (until rates rise).

If price falls to $80 and $90 owed, then equity is wiped out and owe $90 as you say. If this happens in case of a property this is referred to as negative equity: $80-$90=-$10.

[jj1987jj]

Amazing explanation...I've been reading a book on mutual funds...but still did not understand what the leverage was...i wish everyone could explain it in simple way like you....keep it simple, thats the way. thank you!

[ihatemyusername2008]

you broke it down so perfectly that i had to favourite this video

[Navthedon1]

Thanks alot...this is such a good explaination...you rock man!

[dkjan]

You are good. I love all you lectures

[maximum1991]

This is the best way ive ever heard any one explain leverage !!!

[almac4]

Agreed, more people need to be financially literate. This should be manditory part of the curriculum in schools. Sadly it's not

[wendy2212]

@almac4 because the people who run the world make money off the financially illiterate... they wouldn't want to educate the general public as it would eat into their wealth...

[noraklagrangian]

Do you think it's safe to borrow money to invest in the stock market in the long run?

[mckronic]

and what do you do when you lose that money, you would only do that if you could pay back the bank and accept the loss, considering your borrowing money in the first place means you probably don't have much money to begin with so I would say its a bad idea..

[noraklagrangian]

if you borrow and lose the money then you go broke. borrowing to invest is risky so be careful.

[salashaska223]

its a good idea if you are able to pay back the money , thats what you are suppose to do , take chances on other people money... the Capitalist Investors tactic, but you have to be able to pay that cash back...

[airpower123]

how does that work?

do you mean apply for a personal loan from a bank to invest in the stock market?

would they give it to you?

[noraklagrangian]

bank will lend you money to invest if they think you are likely to pay it back, e.g. you have good job, etc.

[vipermesh]

If you have a website up, then all these videos you have uploaded onto youtube can be embeded into your sites web pages. Youve gone to a allot of work and also it will bring more trafic onto your website also bring more sales for your book. Iv saved all your videos and will be putting what you are teaching into action. Teaches in schools do not teach this stuff, on how to handle money. Thats why todays generation is in debt. So this kind of information realy should be educated in school.