What is leverage in investing?

Personal Finance February 24, 2013|Print

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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