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Borrowing to invest is also known as “gearing” or “leveraging.” It is simply the borrowing of money to buy investments with the purpose of increasing wealth. Today, this strategy has become so popular and most people have engaged in a very common form of leveraging by buying a house. When you use someone else’s money to purchase an investment like a house you are leveraging.

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Borrowing to Invest

If you invest in the traditional manner, you designate a portion of your income each month to purchase investment. Eventually, your portfolio will grow over a long period of time. On the other hand, the concept of borrowing is to invest or leveraging borrowing money to make one large single deposit. You still use a portion of your income each month but now you are paying interest on your new investment loan.

There is a lot to consider when deciding if you want to borrow to invest or leverage your investments. This strategy is risky and is certainly not for everyone. However, if you qualify for this type of investing you can increase your gains over the long-term.

To find out if you are capable and qualified for leveraging strategy, check out this article from Australian Securities and Exchange Commission: https://www.moneysmart.gov.au/investing/borrowing-to-invest

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