What if there are ways you can make money with debt and dozens have done it before you
? Right, you can always use exactly these ways for yourself to improve your financial
situation. Whether it's by saving more money, using it to build a fortune, or using it to
supplement your income. Imagine that from now on you could use these negative debts
for something positive. To be honest, the rich have been using debt for several centuries
to build or increase their wealth and to tell you the truth, there is a difference between
good debt and bad debt and with good debt there are several ways to build wealth or
get better financially and that is what today is all about, to show you these ways that
the rich use to use debt to their advantage. Each of these ways can be implemented by you
even if you are not rich, have a business or are self-employed. The great thing is that
these ways have led to the rich building their wealth.
But before we dive into the topic : Hello and welcome back to our channel ! And if you
are new here : We are the finance nerds and on this channel we are helping hardworking
people like you to get more out of your hard earned money by showing you how to use your
money in the most effective way. Remember to give this video a thumbs up at the end,
if you got value out of it and now let’s start !
To start from the beginning, I want to show you what the difference between good and bad
debt is, so that you can apply these principles correctly. Good debt is defined by the fact
that you use it to build up assets that increase in value over time, and this asset growth
can automatically pay off the interest on the loan, such as real estate. Bad debt is
used to buy things that don't increase in value or don't have the potential to generate
income for you, such as credit card debt, loans to buy a car, or a loan for a television.
Now let's look at how you can use good debt to build wealth.
The basic principle of using debt to make you money is to invest profitably and preferably
with leverage. Now what is leverage? Leveraging is using borrowed money to increase your return
on your investment. Of course, by using leverage you can get very high returns, but be aware
that this is due to risk, which also means that you can lose your capital.
Investing in Margin As I just mentioned leverage, margin investing
is where you can buy a higher percentage of shares than you have cash. For example, if
you have $30.000 in your traditional broker account, you can leverage that amount and
open a margin account. What is a margin account? It is an account where the broker lends the
customer cash to buy stocks or other financial products. Such an account allows you to get
50% on the purchase price of a stock. If you have 30.000$ in cash you would get another
30.000$ lent by your broker, that means you get 60.000$ purchasing power from your 30.000$
investment. When the stock price rises, you can pay back the loan and pocket the profit.
But be aware that the broker can also make a margin call if your equity in your account
falls below a certain level.
Short Selling Do you know the movie "The Big Short" ? If
not, then watch it, because it explains very well what I am talking about here. Short selling
is a way of betting against a certain stock, borrowing it from an investor or broker and
then betting that this stock price will fall. If that price goes down, you make a profit,
if it does go up, you lose. Many people have made a fortune by short selling, and it gives
you the chance to make a profit even if the price falls.
Forex Trading Forex trading allows you and investors to
trade large currencies with a small amount of money and leverage your own money with,
for example, a leverage of 100:1. This makes it possible to trade a small amount of money
into a very large amount of money and much faster than normal stock trading.
Leveraged ETF’s Leveraged ETF's allow you to go either long
or short on a particular index. Leveraged ETF's offer investors the opportunity to increase
their returns many times over, but of course also their losses. Proshares, for example,
offers such leveraged ETF's and allows you to invest in various commodities, indices
and sectors with a leverage that can provide for desired returns. Again, this leverage
can work for you or against you and can not only increase your profits but also increase
your losses if you are not familiar with a good entry and exit.
Hedge Funds Hedge funds are one of the biggest users of
leverage and are known for their very high returns. They sometimes leverage up to 10
times their total assets and also use this to let private investors profit from it.
Also, there is always the risk that the assumptions of the hedge fund are wrong and investors
lose their money.
All of these are ways you can make money with debt. Not directly the debt, you know but
debt in the form of leverage that allows you to invest with a larger sum. This leverage
can be a blessing and a curse at the same time. As big as the gains can be, so can the
losses. This is part of the business and you can not protect yourself 100%. However, with
the right strategy and knowledge, you can profit very well from these ways if you know
what you are doing or have someone who does it for you and who knows. All these ways are
only very roughly described here and should only give you a small insight into this world.
If you want me to go into more detail, then feel free to write to me in the comments on
which one you want me to go deeper.
If you enjoyed the video and now want to know more about how to take control of your finances,
click on the video to the right or check out the video description. There you will find
more videos and resources to help you have more money at the end of the month.
And remember to hit the like button if you are willing to take control of your finances.
We hope to see you in the next video.