What is leverage in investing?

Personal Finance February 24, 2013 Print Friendly and PDF

Leverage is the use of other people's money to magnify the gain (or loss) on an investment. Leverage is most commonly used when assets, like a house, are expected to appreciate in value.

When this happens, investors' gains are increased because they make a profit on property that they have not yet paid for. The larger the amount of a loan in proportion to the value of a house or other investment, the greater the amount of leverage.

For more information and an example, see http://www.investopedia.com/terms/l/leverage.asp#axzz2LjttF0zU.

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