What is Leveraging?
In short, leveraging is investment through borrowed capital. Taking on loans to invest in has its advantages and pitfalls and is not suitable for everyone. Leveraging can amplify gains and can also increase losses. Investments with borrowed capital is done with an expectation to get rate of return in excess to the rate at which money is borrowed.
A client who takes a loan for investment purposes is obligated to their banking institution to service the interest payments and the return of principal at loan maturity.
The risk assessment process, in this case, is generally two-fold:
- A client gets assessed by their respective banks for their eligibility to get loans (based on credit score).
- A risk assessment is performed based on their client’s suitability for investments through borrowed capital by:
- Assessing the ability of their client to service the interest payments and ability to pay back the loan while borrowed money remains invested.
- Evaluating a client’s risk tolerance level based on their unique situations.
Though more complex, a leveraged investment boasts a higher initial cost and ongoing interest payments, which the bank’s client must pay—unlike its traditional counterpart. A leveraged investment has the ability to multiply gains but also potentially increase losses (interest payments, principal repayment).
Our expert team looks at the money invested (borrowed or otherwise) in context of client’s portfolio while advising on investments. Keeping your long-term objectives in mind at all times, we will customize our time-tested process to give you the best service possible. We are always looking out for you and your best interest and offer a competitive fee structure with a team of highly capable and experienced individuals behind it. We are here to serve you.
Get in touch with us today if you have any questions, comments, or concerns regarding our investment services or if you would like to schedule an appointment with us. Our team looks forward to helping you get the most from your investments.