risk_portfolio

Leverage

Leverage is the use of borrowed funds or other financial instruments to magnify exposure to an asset relative to the investor's own capital. This magnification increases both potential gains and potential losses, and it changes the risk characteristics of a portfolio.

Example: An investor uses a margin loan to gain a larger exposure to a stock position, increasing potential gains if the stock rises but also magnifying losses if it falls.

💬 Comments


Loading comments…