What is Leveraging?
leveraging portfolio cartoon
We often hear “leveraging your portfolio” but what does it mean?
It’s derived from the word “lever”. Lever is an object that can multiply the applied force. When you are leveraging your portfolio, it means that you are investing using borrowed money. So you have more money to invest, and if your investment is successful you may increase your invested money with a little bit of your own money. But if you screw up your investment…you may end up with even more debt.
Golden rule is…to only borrow money for an appreciating asset.