margin loans – Page 2 – FIRE v London

What’s the ideal level of leverage?

2025-10-142025-10-17 FIRE v London18 Comments

I’ve used portfolio leverage to help me buy two properties in the last 10 years.

To recap the most recent episode, very briefly, it goes as follows:

In December 2021, I borrowed about 25% of my portfolio’s value to buy my Coastal Folly. I targeted reducing this to a 20% ‘loan-to-value’ (LTV) as soon as practicable.
Only a few weeks later, Russia launched its full-scale invasion of the Ukraine. This disrupted the stock market, and energy markets. The energy market disruption led to a spike in inflation, which caused central banks to hike base rates. It also caused my LTV to go up, not down.
I steadily paid off a bit of the loan, but the higher rates meant that my interest expenses went up 2.5x over the following 20 months.
Since then however my portfolio has gained in value, and my loan has reduced, leaving it today at about 13% of the portfolio value. My interest costs are about 1.5x the January 2022 starting point, which is mildly annoying but very manageable.
I’m left feeling firmly under control, with a relatively low level of risk. The two key risks that I need to consider are
1. a hike in interest rates – which feels very unlikely
2. a plummeting stock market – this feels a lot more likely, particularly in October 2025. But with my loan being only 12.5% of the portfolio value, even if the portfolio suddenly halved in value (a very rare and unlikely scenario) the loan would still amount to only 20% of the reduced portfolio value.

This leaves me wondering what the long term idealised level of leverage is for my portfolio.

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July ’25: New high watermark

2025-08-16 FIRE v LondonLeave a comment

There wasn’t a huge amount to report from July.

Politically/economically I fear the most important event in the UK was the Labour government’s failure to enact its intended welfare reforms. This leaves the government a) unable to control spending b) unable to nudge the economy towards more jobs and more growth and c) facing politically expensive tax rises later in the year. For now, this hasn’t impacted the stats or portfolio very much, but it will have more of an impact over the next few years.

Meanwhile, it was a nice pleasant summer month in the UK. I managed to get to Wimbledon for the semi finals, which was a delight. I also explored the bird sanctuary at Arne, near Poole, and other bits of Dorset. I even visited Italy, which was surprisingly good value for money.

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Compounding, type II

2024-10-282024-10-28 FIRE v London1 Comment

Supposedly Albert Einstein called compounding the 8th wonder of the world. Certainly the wonder of compound annual growth rates is something I feel quite viscerally, the more so with each month that I track my portfolio. But I’ve been struck recently by a radical improvement in my portfolio’s dividend income, far in excess of the portfolio’s return, that has occurred thanks to the margin loans I’m using. For anybody curious about margin loans, this blog post shines a light on what’s happening.

While my portfolio has grown 14%…..

As a quick visit to my Monthly Returns page can see, my portfolio has returned around 20% over the last twelve months (to September 2024 inclusive). This is a good, but not exceptional period over the 10+ years I’ve been tracking my portfolio – which has returned just over 9% p.a. since inception over 10 years ago.

As it happens, despite the underlying returns of around 20% my own portfolio (and I’m excluding Mrs FvL’s in this analysis) has only grown in size by 14% over this twelve month period, thanks to some significant withdrawals to pay tax bills, make ‘off balance sheet’ investments, and such like.