Leveraging

Institutional investors have been doing it for a long time. Independent investors are becoming more interested in it. Leveraging - borrowing money to invest.

If the return on your investments is higher than the cost of the borrowed amount, than the leveraging concept is beneficial.

However, high-return investments are riskier. Consequently, leveraging becomes a bit riskier.

Leveraging can also apply to simpler and particularly safer situations such as:

• financing 95% of the mortgage on your personal residence
• borrowing money to contribute to your RRSPs and decrease your unused contribution room
• buying and financing an income-generating property
• buying mutual funds and financing a portion of the purchase cost

It is recommended that investors limit their leveraging to their risk tolerance and that they be sure that if their situation takes a turn for the worse, they don't have to sell off their assets in order to pay the debt.