Risk and leverage

What is the big benefit of investing in real estate? It's not the return on investment - it's usually around, what, like 5-10%, I think. (OK, the last couple of years were exceptional here in SD, but the market is tanking now.) The magic of real estate is the leverage. You make a big initial investment, make hefty mortgage payments, sure, but the return is on the total value of the home. That's the sweet part.

You get leverage on stocks by buying long-term options, LEAPs. Another lesson from Joel Greenblatt.

So how can I take advantage of this? I was thinking of buying LEAPs for some of my MFI picks. It's a really aggressive and risky strategy. Maybe more risky than I am prepared to accept. But the idea would be that one or two of every five stock picks from the MFI list would be a LEAP instead of the underlying stock. If the term of the LEAP is longer than the period that I plan to hold the stock, it would take the company tanking for the LEAP to lose all of its value. Especially since I have flexibility in sell date - MFI traditionally says to hold for about a year, and arrange selling to minimize tax effects; because this is a retirement account, that's not a concern. Instead, I can hold for about a year or as much as two years (Greenblatt says that two years should be about the same as holding for one, according to an interview mentioned in the discussion group). So is the riskier strategy worth the potentially higher rewards? I'll have to think about it. Maybe do some investigating into LEAPs of current MFI stocks, and follow their value over the next 6 months to a year. That might be a good test.