Read? Leverage With Margin Account???
Long long ago; in the famous CBox; Uncle88888 came to know one guy going around forums and cboxes boasting about his leverage return on his bond trading like you didn't leverage on low interest rate you are dumb!
Not sure now what happened to his bond trading and his leveraged gains?
Our OWN Money and Other People Money?
How do some people think about Return On Capital? Actually it is Return on Own Capital
All cases have $50K as Capital
Investor A invested all $50K @ 5% yield and received $2.5K investment income. ROC or Return on OWN Money is 5%
Investor B invested $40K @ 5% yield, $10K as war chest and received $2K investment income. ROC or Return on OWN Money is 5%
Total investment @ 5% yield and e.g. margin interest charge @ 1% will receive $2K + $0.4K = $2.4K and Return on OWN Money is 6%
Somehow Investor C will feel that he is getting superior Return on OWN Money by thinking Mathematically in this form $0.9K/$10K = 9%! Wow!