Investing Glossary: L

leverage : The degree to which an investor or business is utilizing borrowed money. For investors, leverage is a means of multiplying the return on an investment by borrowing money to purchase additional securities or other assets. Buying securities on margin is an example. If you have $1,000 of cash and borrow another $1,000 from your brokerage, you could then purchase $2,000 of stock. If the value of the purchased stock increases by 10 percent ($200), then you have realized a 20 percent gain ($200/$1,000) on your actual cash investment.

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