Altruists who don't care too much about risk (and young people in general) should plausibly use leveraged investing. What's the best way to get leverage?

- Margin borrowing seems like the default solution. I might try it if there's nothing better.
- Theoretically options could be used, but I'm unsure whether they work in practice.
- Supposedly futures offer massive leverage, but I haven't explored the details, and they seem hard to trade yourself. I'd like something I can just buy and hold for a long time.
- Something else?

Ideally, there should be a fund that you just buy into to get leverage, with someone else handling the details. But leveraged ETFs don't work because they're optimized for day trading and as a result lose money for buy-and-hold investors.

Note that with using leverage, there's always margin calls, so calculating expected return becomes more complicated.

e.g. if you're at 5x leverage, a 20% loss in the market will wipe you out, and 20% losses happen pretty frequently in stocks.

I'm not sure what's the best quick and dirty way to adjust your expected return estimates to take account of this.

Maybe you could take your regular estimate (i.e. asset expected return * leverage ratio), then multiply it by the probability of wipe out in the relevant time period?

e.g. If you think the S&P has a 10% expected return, and you invest at 5x leverage for a year, the overall expected return is very roughly:

(1 - p )

50% + p0%Where p is the probability of wipeout occurring in the period. In this case, p is the probability of a 20% loss occurring at some point in the next year.

In this case, it's only worth investing with the leverage if p < 0.8, and that's if you're fully risk neutral. I'm not sure what p is, but it could easily be ~80%, which would mean using 5x leverage has lower expected returns than unleveraged investing. Which could help to explain why so few people use that much leverage.

Paul might have a better way of thinking about this!

Over what period are you measuring these drawdowns? I can look it up for you.