Investing for Beginners 04: Buying on Leverage and Margin

Investing for Beginners 04: Buying on Leverage and Margin Leveraged investing is when you borrow currency in order to invest. In a traditional investment strategy, you might set aside a certain amount every month to be invested, so that the principal you had invested would grow over time, compounded by any earnings on the investment. With a leveraged investment, you would invest a large sum up-front, then make regular payments to pay back the amount you borrowed, plus the interest. The potential advantage of the leveraged investment is that there is a supposedly larger amount earning returns over a longer period of time. If the return on your investment is greater than the principal borrowed plus the interest, your leveraged investment has outperformed a traditional investment. Leverage can dramatically increase your investment winnings, and leverage can be great for those who are educated in the proper techniques and are skilled in its use. But if you don't know what you're doing (and sometimes even if you do), leverage can also magnify your losses to 100% and beyond. It's this simple: when you introduce leverage... you introduce risk. Intro by: Laurent Caccia http://www.youtube.com/laurentcaccia

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