How much leverage is safe in investing?

[RMA]

1. The first question I am facing is whether I should expect the markets to return more than 2.8% return in a long run or not? Nobody knows this but looking on the historical returns one can assume that there are more chances of achieving it so I guess I'm willing to take my chances. Only I have to take care that I do not overleverage myself and I am not forced to liquidate my holdings at wrong timing.

You might want to look at the CAPE ratio as well as historical returns. Typically, a high CAPE ratio is associated with low returns over the next 10 years. Currently it is extremely high (about 37 or so). The only time it has been higher was just before the the late 90's dot.com bubble burst in 2000. 11 years later the S&P500 was below its 2000 levels. So, even investing over 10 years there is a chance that you will have poor returns. Bear in mind that if you're borrowing at 2.8% you need to be looking for returns of quite a bit more than that to make all this worth your while. Personally, I wouldn't bother.

Thank you very much for your input and kind advise. I will be very cautious as I know investing with leverage is very risky.

[RMA]

Borrowing money to invest seems to be quite far from a sensible strategy...

Very true but somehow I do not get to wrap my mind that I am rejecting 2.8% interest loan without any principal repayment conditions. It is like I have surplus cash which I am putting in bank at 2.8% deposit when I know the value of money is going to go down in future and I most probably can make more by investing it somewhere else. I don't want to be in a position down the line where I regret that I had the ticket, I knew my destination but I didn't board the bus.

Anyway, I am still confused so I will not take any hasty decision and will wait sometime. Maybe I will change my mind and go very conservative, let's see.

[captainspoke]

...
Anyway, I am still confused so I will not take any hasty decision and will wait sometime. Maybe I will change my mind and go very conservative, let's see.

Ah, finally...

...denouement.