Leverage is like fire. Use it to your advantage, but beware the burn
The most important lesson is to separate conviction from leverage
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OVER the past few months, South Korea has provided investors with a remarkable real-time lesson in the dangers of leverage.
Single-stock leveraged products, introduced in South Korea in late May, gave investors magnified daily exposure to firms such as Samsung Electronics and SK Hynix, and they quickly became popular.
But the feature that made them attractive – the ability to magnify gains – also magnified losses; regulators intervened, suspending new listings and tightening requirements.
