level 8 (Leveraged Investments)

Leveraged investments are when you use borrowed money to invest in other businesses, rather than your own.

For example:

• Your $1 million could be used in a stock portfolio for a 7 to 10% return.
• But if you borrow $3 million at 4% interest, you now have $4 million invested.
• If your investments return 10%, you make $400,000 instead of $100,000.
• The catch is that leverage magnifies gains and losses.

For instance, if your investments go down just 10%, you are now down $400,000 and still owe the bank their investment back.