A question about the validity of borrowing for the purpose of investment...

Economics Economics Questions
1

Here is an interesting thought I had:

If you could get a loan against your house, would it be a good idea to invest that money into your portfolio if someone could guarantee you a certain amount of return on your investment?

Not that I would do this, to me the stock market is far to volatile. But the counter point to that (for me anyway) is, that is what people did with the housing market, and it failed. Why would the rest of the market not have the same risk.

2

This is called leverage. Borrowing to invest is fine but it reflects a higher-than-ordinary level of confidence that the venture will succeed. It’s rarely justified for the average person to be investing in the stock market to begin with, let alone with leverage.

Clayton -

3

I see, thanks for the response, that makes sense to me.