Using Leverage in the Stock Market: The Good, The Bad & The Ugly
Using borrowed money to buy an asset isn’t something that uncommon in financial markets. If you own a home – chances are, you’ve borrowed money from the bank in the form of a mortgage. In the example you’ve put down a 20% deposit to buy your first home and the bank is covering the other 80%, effectively you’re working with what is 5x leverage. Much the same can be emulated in the stock market via the use of Contracts for Difference (CFD’s) or a margin lending facility on shares. Investors use these kinds of features to gear up their investment