Value Investing legends Warren Buffett, Charlie Munger and Benjamin Graham write that any kind of financial activity on Margin (or Leverage) is dangerous.
Buffett and Munger
In their 2022 Letter to Shareholders, Warren Buffett writes the following about his business partner Charlie Munger.
"Charlie and I think pretty much alike. But what it takes me a page to explain, he sums up in a sentence. His version, moreover, is always more clearly reasoned and also more artfully – some might add bluntly – stated.
Here are a few of his thoughts, many lifted from a very recent podcast:
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• Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it and start buying.
• There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice."
Benjamin Graham
In the preface to Graham's book, The Intelligent Investor, Buffett calls it "by far the best book about investing ever written".
"In our conservative view every nonprofessional who operates on margin should recognize that he is ipso facto speculating, and it is his broker’s duty so to advise him."
Buying a house with a loan in the hopes that the house will appreciate in price is — by definition — operating on Leverage, or on Margin (not to be confused with the Margin of Safety).
House ≠ Asset
In this 2009 interview, Donald Trump and Robert Kiyosaki — two real estate moguls — explain why one's house is not necessarily an investment; and can even be a liability.
Renting vs Buying
A more detailed explanation of the calculations involved in the decisions behind the renting vs buying of a house.
Submitted by GrahamValue. Created on Wednesday 5th March 2025. Updated on Thursday 6th March 2025.