The Wall Street Journal did an in-depth analysis on what has been going on in the markets this past week or so. Turns out it was people borrowing money they didn't have, to buy investments they shouldn't own, and then ended up owing money that they didn't have! How did that happen? It's called leverage. Leverage is a fancy term for borrowing. As long as the assets you borrow against are appreciating, you're fine. We all, or at least most of us, use a form of leverage to buy our homes. In the case of the recent market, it appears to have been people getting greedy and wanting to get richer. They continued to buy things they couldn't afford. No surprise there that they ended up owing money they didn't have and had to sell some of their holdings to cover their debt. This is a hard lesson that very often turns out badly. Many people mistakenly believe that Bill Gates, Jeff Bezos, Elon Musk etc got rich because of the stock market. Their actual wealth was achieved because they founded/owned the company. A lot of it!
How to lose money the easy way. Try to make yourself rich!
