Leverage is the use of borrowed money to make investments. There are many variations but it all boils down to borrowing money to invest when you don’t have the cash available.
It can be a very profitable strategy but also a very dangerous strategy. Anyone contemplating leverage should have a high risk tolerance, a long term time horizon, a good investment knowledge, the income to make the monthly payments on the debt and cash available elsewhere to cover off any potential margin calls.
Not for the faint of heart, not for the new investor, not for the ‘Get Rich Quick’ Cowboy, but still a legitimate strategy for some.
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