“The magnification of gains and losses stemming from leverage is typically symmetrical: a given amount of leverage amplifies gains and losses similarly. But levered portfolios face a downside risk to which there isn’t a corresponding upside: the risk of ruin. The most important adage regarding leverage reminds us to ‘never forget the six-foot-tall person who drowned crossing the stream that was five feet deep on average.’ To survive, you have to get through the low points, and the more leverage you carry (everything else being equal), the less likely you are to do so.”
—Howard Marks.
