positive and negative leverage

Positive Leverage is where an investor receives a higher rate of return on their investment than the rate they are paying to borrow funds for that investment.

An example of positive leverage is in a real estate transaction where the return on investment without leverage is 8%. 

Negative Leverage is where an investor receives a lower rate of return on their investment than the rate they are paying to borrow funds.

What is Negative Leverage?

How much leverage to use depends on how much financial risk you are willing to take. Many investors recommend your debt-to-equity ratio should not be higher than 70%.

How Much Leverage Should Be Used?

Positive leverage amplifies the return on equity. If you are in real estate, using leverage can help you get the returns you are looking for.

Why Take Leverage At All?

When trading with a margin account, it is possible to have positive leverage as well. Just because you have positive leverage does not mean you should do it, though.

Can You Have Positive Leverage Trading Securities?

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