Adding leverage increases your risk, but increased risk is one way to possibly gain better returns. There are many ways to gain leverage, from using loans, to options, to futures. I'll explain how to use all of these methods.
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Adding leverage increases your risk, but increased risk is one way to possibly gain better returns. There are many ways to gain leverage, from using loans, to options, to futures.
A fundamental question is how much leverage you want to use. Brokerages make it all too easy to over-leverage. I usually use a leverage ratio between 1.3 - 1.5. For example, if I have $100k cash, I may use that to invest a notional value of $130k in a diversified portfolio.