You might think that this would make margin investing the polar opposite of the type of strategy that FI/RE-focused individuals would adopt, and yet there’s the potential for this mash-up to be beneficial.
I will give the (significant) caveat, regarding the information below, that using margin to create investment leverage requires significantly more market knowledge than the average investor often possesses.
What is Margin Investing, and How Can It Complement The FIRE Movement?
Margin investing involves borrowing money from a broker to invest in various assets. This type of trading can greatly amplify returns on investments when done correctly.
Understanding Leverage to Maximize Returns on Investment
When it comes to margin investing, understanding the concept of leverage is key. Leverage allows investors to increase their buying power and amplify investment returns using borrowed money from a broker.
This can be an effective strategy for FI/RE acolytes. Long-term strategies such as compounding interest or dividend reinvestment can take time before realizing maximum profitability, which leveraging amplifies over shorter periods.