Financecalendar_todayLast updated: Apr 2026

What is Leverage?

/ˈliːvərɪdʒ/

Leverage means using borrowed money to amplify potential investment returns. It multiplies both gains and losses relative to the actual capital you put in.
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Everyday Example

If you use £10,000 of your own money plus £90,000 borrowed to buy a property worth £100,000, you are 10x leveraged — a 10% rise gives you a 100% return, but a 10% drop wipes you out.

publicReal-World Application

Hedge funds routinely use 10:1 leverage, meaning a 10% loss on their positions would eliminate all their investors' capital.
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Did you know?

The 2008 financial crisis was largely caused by banks operating with 30:1 leverage — a small decline in mortgage values was catastrophic at that scale.

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Key Insight

Leverage is a double-edged sword. It can accelerate wealth creation or wealth destruction depending entirely on which direction the underlying asset moves.

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