You,Leverage,Your,Investments, finance, share, loan Do You Leverage Your Investments

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The reason people call it "leverage" isbecause typically existing assets are used as the securityor basis of the borrowing.  That is, you leverage off the valueof a current investment or asset, to borrow more money toinvest. If you have not borrowed to invest before, but are consideringit, you really should discuss this with a licensed financialadvisor before you do.  The concepts provided in this article are general in nature and should not be taken as specific advice to be applied to your specific circumstances.  A financial advisor will be able to tailor a borrowing structurewhich perfectly matches your goals.  And if you don't have onesubmit a request for a free consult at our financing page here:Investment Financing Advice 10 years ago, my borrowing habits were what I would call "typical" in today's society. I had a credit card, whichtypically ranged from between $0.00 to about $4,000.00 in debt,I had a small personal loan which I bought some furniture withand I had a larger personal loan which I financed a car purchase with.  There are 2 problems with this type of borrowing.  Firstly,all the assets I bought with the borrowed money were depreciating assets.  This means that as I paid off the debt, the value of the things I bought decreased.  Secondly, as I purchased "consumables", the interest I paid on these loans was not tax deductible.  This makes for a very expensive borrowing. Today, due to the many benefits I found you get when you borrowing to invest, my debt profile is anything but typical.  I now have much more debt, but I have borrowed to buy appreciating and income generating assets.  For example, I have a massive debt on a property in Victoria, Australia.  I also have a reasonable size margin loan helping me make money in the stock trading strategy described here:  And finally, as per all foreign exchange trading accounts, the oneI have set up to trade our Foreign Exchange trading strategy, is leveraged outat 100:1 (so every $1 I put in allows me to invest $100).  My debton consumables is now negligible. So what are the benefits of borrowing to invest?  Firstly, when you borrow to invest, to coin a well know phrase,you are "using other people's money" to earn more money in the investment markets.  A great example of this is in our FXTrading strategy.  If I invest $10,000.00 and leverage it out at100:1 (the strategy actually allows leverage of 400:1) that meansI have $1,000,000 invested, just by putting up $10,000.  The beauty of this strategy is that it is structured so that evenbefore you earn on your FX trades, you earn interest on the moneyyou have on the market.  So by investing $10,000 in this strategy,you will earn cash interest on $1,000,000.  As a hyperthetical, if the interest rate applied to your account isa conservative 2%, the interest earned over 12 months would approximate $20,000, and all you put in was $10,000.  For more information on how our strategy works visit the summary page here:Foreign Exchange trading strategy The above example describes very well, the first benefit of leverage.  By accessing more money, to invest, you can earn way higher returnson your investments than you otherwise would have been able to.  The second benefit you can get from borrowing to invest is apossible tax benefit.  For example, in my situation where I have borrowed to purchase an investment property in Victoria, asI rent out that property and earn an income from it, the interestpayments on that mortgage become a cost associated with that income.  As such, in my circumstance, I can claim those interestpayments as a tax deduction.  This means that while my assetis making me money, the tax office is actually giving me adiscount on my borrowing (by paying me back a proportion of myinterest payments in my tax return) This works exactly the same in the margin loan I am using tohelp with my stock market investments.  I have borrowed some money in a margin loan (I usuall try and keep the leverage hereat about 1:1, so every dollar of my own I invest gives me anotherto invest) and pay interest every month on that loan.  My stock market  strategy pays me my consistent income every month, which is more than the interest on the margin loan.  And then, at the end of the tax year, I deduct the interest payments from the money Iearned, gaining a tax advantage.  To read more about this strategy,a summary is posted here: Stock Market Trading Strategy So there are definate advantages you can gain from leveragingyour investments.  There are risks also though, which is whyyou should seek proper financial advice prior to moving down this path. What are the risks.  Basically there is 1 risk associated withborrowing to invest and that simply is the risk of over-extending yourself.  When you borrow, you need to do so in away that does not leave you unable to meet your funding requirements.  In a normal loan (like a mortgage, or investmentloan) this means you need to be able to fund all your repayment responsibilities.  If you cannot meet thesepayments, your lender has every right to take your investmentsoff you.  This is not good.  In a margin loan situation, itis a little different.  If you borrow too much here, you may breach the allowable % of assets to debt you are given,and if this happens, you will be expected to put more moneyin to put the loan back in "good order".  This can be quite difficult if the market swings strongly against you. There are strategies to protect yourself against these risksthough which your financial advisor can help you with.  In my experience, it is definately worthwhile borrowing to invest,but only if you manage your risk, and cashflow responsibilitiesproperly.  So the one piece of specific advice I will give you here, is speak to a licensed financial advisor or accountantabout whether this is an appropriate strategy for you, and then how to structure it match your personal circumstances. If you don't have an advisor, visit our financing page and submit for a free loan quote.  A licensed advisor then will contact you to discuss your needs.  Here is the link to our financing page: Investment Financing Advice Investigate leveraging as a method of improving the valueof your investments, the rewartds are definately worth it.  But only apply a strategy which you are comfortable with, where you can manage the risk, and you will reap the rewards. _____________________________________________________________________ TheOnlyWay.com.au - Learn to make the money that will make You