Investing Should Be Boring (5/15/2025)

Investing Should be Boring as F**k

I learned from a fellow financial planner this week about a new FinTech company trying to lure clients by offering leveraged investing. This isn’t a new concept – leveraged investing is using debt to invest in the market and has been around for decades – but the way this company is offering it is a bit different and very risky. 

While this newsletter is anything other than an endorsement for this predatory company, I know many of you will ask….the company is called Basic Capital, and it is currently being ROASTED by thoughtful & reliable professionals in the personal finance space.   

For more background, the company “allows” you to invest your retirement accounts with leverage (this is where you borrow against your existing investments in order to buy more.) Essentially you would move your IRA to their platform, and they would lend you money to invest more on their platform with your retirement account as collateral. 😬 Leveraged investing is considered highly risky under any circumstances, which is why most banks and brokers will only allow an investor to do it with money in a taxable brokerage account, and with a small portion of your investable wealth. If you’ve ever heard of a margin account or margin investing, that’s what this is, a loan against your investments where the proceeds are also invested in the market. You typically pay interest on the loan just as you would with a personal loan or mortgage.  

Their website boasts what will happen “as the market grows”....which sure, cool cool cool, sounds great. But what happens when they market, oh, I don’t know,....goes DOWN?! I looked, and I don’t see much of an explanation of what happens to the investor and their accounts when this occurs. 🥴 

When you’re participating in leveraged investing, markets going down is bad. Very, very bad. 

And this isn’t the worst part. Small tech companies trying to disrupt financial services by offering questionable services happens pretty much everyday. The worst part? THE FEE STRUCTURE!!! 

You would pay interest on the amount you borrow, you would pay a % fee on the balance of your account, AND you’d pay a % of the gains (hopefully 🤞🏻). Like WTF?! This is why we need the CFPB! 

I haven’t written much in the past about appropriate fees so you may not feel like you have a baseline, but IMO this is the investment account equivalent of Ticketmaster charging you $200 in service fees, order processing fees, a delivery fee and facility charge for a concert ticket with a $60 face value. 🙄 You’re basically being robbed. 

So why did I bring this up this week? Well, I certainly hope none of you are doing business with this company and I pray that continues to be the case, but this is an excellent reminder that you should be very suspicious whenever anyone is suggesting anything other than Basic Bitch Boring Investing. When someone boasts “Now you can invest like Rich people do!” or “We’re democratizing XYZ”....Run! 

Wishing you good financial health.