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Borrowed Capital

Borrowed Capital

Borrowed capital, also known as leverage, can be a powerful way of investing. It is essentially “other people’s money” to finance an investment. When an investor obtains borrowed capital from another individual or bank, it means they have access to more funds than if they had their own assets to invest. For instance, if an investor has $10,000 of their own funds and they borrow another $10,000 then they have $20,000 that they can invest in the stock market, real estate, or another investment. With a larger sum, the investor can potentially make a higher return on their initial investment. Despite the potential to make money, borrowing capital can also be risky. It's important to investigate all of the details associated with the loan or credit facility and to understand the implications of the loan. It is also important to note that the returns made on the borrowed capital need to be sufficient to cover the expenses associated with the loan in order to be successful. That means investors should always have a detailed plan of their investment strategy and an understanding of the markets they are targeting.

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