 Good day fellow investors. Today we're going to discuss a topic that is not considered prudent by the financial authorities. However, academics have found that it is considered very, very wise and that is using leverage or debt to increase your financial returns and lower your risks. Now everybody is always saying you should avoid that, you should avoid mortgages, you should avoid margins. However, two professors from Yale, Ian Iris and Barry Nalebouf, if I pronounce that right, probably not, their article Lifecycle Investing and Leverage Buying Stocks on Margin can reduce retirement risks. They have analyzed data from 1871 and found that young investors would be much better off if using a certain amount of leverage in their early investing years. How much better off? They found that you can retire six years earlier and extend your standard of living during retirement by 27 years. What is the main contributor to long-term investing returns? Time. Dividends over time, reinvesting, compounding and if you look at what's the future value of the dollar invested when you were 20, 25 and the dollar invested when you were 55, the difference is huge. So if you invest $500 when you are 22, the future value at a normal return rate of those $500 invested when you are 21 is above 2000 and something. As you grow older, you invest more and more and more money. However, the value at retirement of that money that you invest when you are 46, 47, 48 gets lower and lower and lower because the time is shorter and it doesn't allow for your investments to compound over time. Therefore, it is extremely important that you invest as much as you can when you are young. My favorite investing leveraged option is to take a mortgage. So that's the safest debt option and I really think everyone, even if it is a huge part of your salary now that you are young, should invest in real estate through a mortgage because the down payment is low, it's minimal and you can take other people money to invest in that house which will appreciate over time. You will just increase spending your money on rent as you grow, as you grow, as you grow. So really taking the pain of buying a house is the start. The researchers went deeper into the matter and they say that young people should use leverage, thus use margin investment, in order to invest in stocks. They have found this. Analyzing data from 1871, where people would invest from 21 years old to 65 years old, you can see the lowest line here is a normal bond stock investment strategy. Where you invest in stocks, 110 minus your age, thus if you are 20, you invest 90% in stocks, 10% in bonds. As you get older, you invest up to 50% of your investment in bond and stocks. As you can see here, over 40 years is the worst wealth accumulation strategy. The second strategy is investing 100% in stocks, which is the line in the middle here, and you can see that it is much better than a bond stocks allocation, but one where when you are young, you take on margin two to one, not 20 to one, not crazy margin levels, margin level that will not allow you to get wiped out. And from the age of 20 till the age of 40, you invest always with the margin, you can see that it really beats any other investing strategy over the very long term. We are talking here 40 years. So you have to really see how margin fits your investment strategy. There are two investment strategies. For the more sophisticated, you can buy two year call options that are in the money. So the more they are in the money, the smaller will be the leverage, thus the lower the risk. And you can always invest on margin. However, if you look at fidelity, the margin interest rate is 4.25%. While the price earnings ratio of the SAP 500 is 25, the stocks in the long term will give 4% from the level they are now. So it isn't wise to invest now. If we look at the period the researchers used from 1871, the average margin cost was 5%. However, stocks have returned on average 9.1% in that period. So there was a 4.1% premium that stocks offered in relation to margin. So you really have to be patient. And at some point in the future, stocks will offer again a higher return in relation to the margin cost. And then you might think, okay, I will start slowly leveraging my portfolio, especially if you're young and below 45. In the very long term, you will reap extreme benefits. In addition to taking debt to buy a house, which is against something very, very important to do. So of course, this is just some food for thought. Really, you should sit down, read the article from the professors and see how that fits your investment strategy. However, it's a finding that I really wanted to share with you, because I think it can really increase your retirement well. As we have seen in the picture, those who have used margin at some point in time, they have increased three times their retirement wealth over time. If you add a little bit of investing, a little bit more better returns, shuffling around from index funds, rebalancing, I really think investing on margin can lead to four times more wealth over the long term for retirement with the same risk, with the same long term risk. Because you are not doing crazy margins, you're just a little bit leveraging your portfolio to take advantage of the time you are investing when you are young. I'm really looking forward to your comments. It's a very delicate subject, because how can I say that investing on margin is less risky than investing in bonds and stocks with normal portfolio allocation? Thank you for watching. I see you in the next video.