Leverage

Leverage refers to the use of borrowed capital or debt to increase the potential return on an investment. The idea behind leverage is that borrowed funds can finance an investment with higher growth potential, thereby maximizing profits. However, leverage amplifies both profits and losses, meaning that using too much leverage can result in significant losses as well. Therefore, it is essential to use leverage prudently to balance the rewards and risks associated with investing. In short, leverage allows investors to potentially earn higher returns by increasing the amount of capital they have available to invest, but it can also result in higher risk and larger losses.