When it comes to investing in the stock market, you never want to borrow and invest any money you cannot afford to lose. Always make sure you have 6-12 months’ worth of your monthly expenses in savings before you put a dime in the stock market.
Remember, even though you might be investing in some of the best and most stable stocks around (with the stuff that you learn on this site!), no one can fully predict which way a stock will go in the short term and you don’t want to be caught in a situation where you forced to sell your stocks because you desperately need the money to survive. Ouch!
So how does leverage (borrowing money) make this scenario even worse?
Before we dive into that, let me show you how leverage works.
Let’s say you invested $1,000 in Apple stock and it rose by 25% …