Originally Posted by Unregistered

Wow didn't expect so much posts on me taking leverage for investments. So maybe just to share a few thoughts and calculations that I thought through.

My investment approach is simple: Valuing investing in companies with strong balance sheet and deep economic moats that have business performance temporarily affected because of covid-19. I stick to my area of competence and only invest in companies I understand. Time horizon is flexible but usually hold for 6-24 months historically.

There's two kind of debt I'm using:
1) Personal Loan aka unsecured debt (DBS/SC personal loan at APR 3.88%). I have to make monthly payments to the bank/FI. Market fluctuations have no impact on me. E.g. if I buy DBS shares today at $19.40, even if it falls to $12 by May, my creditor cant force me to sell my shares. My only risk is my ability to make monthly payment which for most people is dependent on my job, and thankfully for my case is not an issue even with covid-19.

2) Share financing aka secured debt (Vickers/Poems at interest rate 3.2 and 3.1%). Market fluctuation will have impact because you have to maintain margin maintenance at 1.4x. Once you deposit cash collateral, the credit line is ready for you to tap but if you dont tap, you earn low interest on the cash collateral.

If market goes down, personal loan goes in first. If market recovers, good. If it doesn't and falls further, share financing comes in. I never deplete all my cash. If market side ways, dont do anything.

Let's try a gambling example. In an extreme case where new waves of covid-19 pops up/country in extended lockdown/travel remains unviable, Genting Singapore crashes back to March lows (that's around 40% fall from now). I go in with 0.5x leverage (50% use at unsecured credit and 50% use cash). Maintenance margin is only triggered at $0.35/share. Of course anything is possible but bear in mind Genting Singapore is holding net cash of $0.31/share. Even in March lows, they are trading at 2-3x their forward operating earnings. Take a look at Macau casinos where 97% of their revenue evaporated and they are still trading at a higher multiple. At least that gives me sufficient comfort to sleep soundly at night. Of course, the underlying assumption is the company you choose is good.

Then what if Covid-19 last for many years? That's not impossible but even Spanish flu in 1918 lasted for only >1 year. I choose to have faith in human ingenuity when almost the whole world is trying to find a vaccine for it..

Just want to put a disclaimer: I am not encouraging reckless stock market investments using leverage. It has to be used discretely. It has to be tailored to your financial situation and current position in life (in my case, i'm 26 and my parents dont rely on me financially/I just give them allowance etc).