Borrowing to buy investments can be an effective way to boost your potential returns. This is called using leverage. As long as your investment increases at a rate that is higher than your borrowing costs, you can make money. But taking on debt involves more risk than paying for an investment outright with cash. Here are four ways to borrow to invest:
- Take out a loan or line of credit
- Borrow against your home equity
- Buy on margin
- Short sell stocks
All of these options come with risks – you could lose more than you originally invested. Think carefully about your options and speak to a financial representative to understand whether borrowing to invest is right for you. Learn more about these borrowing options.