07-20-2022, 10:54 AM
Leverage when young and expecting a large future bump in salary
<!-- SC_OFF --><div class="md"><p>Scenario:</p> <p>I have around $300k in cash or stocks right now. I expect my non-investment income to go up considerably, such that I will have $1-2 Million in cash in a couple years. Hence I know that in a year or two I would want to increase by S&P 500 holdings to at least $1 Million.</p> <p>In my opinion therefore, it would be rational right now, to price in my higher future income, and leverage up, buy $1 million in S&P 500 right now (on a margin of $200k) instead of a smaller amount, to have more time exposure.</p> <p>I spend around $2k a month, have no liabilities or debt or expected increase in spendings, a liquidation of this $200k would not affect my quality of life. Leverage would be free, with futures.</p> <p>Is there any reason for this not to be right thing to do?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/suknil"> /u/suknil </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/w2svr9/leverage_when_young_and_expecting_a_large_future/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/w2svr9/leverage_when_young_and_expecting_a_large_future/">[comments]</a></span>
<!-- SC_OFF --><div class="md"><p>Scenario:</p> <p>I have around $300k in cash or stocks right now. I expect my non-investment income to go up considerably, such that I will have $1-2 Million in cash in a couple years. Hence I know that in a year or two I would want to increase by S&P 500 holdings to at least $1 Million.</p> <p>In my opinion therefore, it would be rational right now, to price in my higher future income, and leverage up, buy $1 million in S&P 500 right now (on a margin of $200k) instead of a smaller amount, to have more time exposure.</p> <p>I spend around $2k a month, have no liabilities or debt or expected increase in spendings, a liquidation of this $200k would not affect my quality of life. Leverage would be free, with futures.</p> <p>Is there any reason for this not to be right thing to do?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/suknil"> /u/suknil </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/w2svr9/leverage_when_young_and_expecting_a_large_future/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/w2svr9/leverage_when_young_and_expecting_a_large_future/">[comments]</a></span>