Buying a Leveraged ETF vs. Buying on Margin

Buying stocks on margin is not something new; people have been doing it for a long time. Just before the great depression in the 1930s, investors were allowed to buy stocks with just 10% margin (meaning you put in $1,000 if you wanted exposure of $10,000). That was one of the major reasons why the economy went out of whack during that time. People borrowed too much and were forced to sell their positions due to margin calls, which forced the prices down. Investing in the stock market on margin shouldn’t feel strange because you probably bought your house and car on margin; it’s essentially the same thing. Using credit to buy and sell things at a faster pace is one of the foundation stones of our modern world (most of it anyway). It is in a lot of ways a natural thing, but that doesn’t make it non-risky. It’s like driving cars. It feels natural but is still the riskiest thing most people do in their day-to-day life