The Use of Leverage

Leverage in and of itself isn’t bad, but it must be carefully considered.  It can become a problem either because investors never take the time to properly consider it or because investors over use leverage in an attempt to increase their returns.  The over use of leverage is the ultimate financial temptation. It is especially tempting when times are good and the economic outlook is nothing but optimistic. It is also tempting to over use leverage when everyone else is doing it and you begin to feel you are being left behind.  But leverage can be dangerous, especially at extreme levels.  There is hardly a single example of a major financial implosion that didn’t involve the over use of leverage.

Keep reading