Leverage & Shorting
Leverage multiplies losses first
Put in $1,000, borrow $1,000, buy $2,000 of stock. The stock rises 20%: you make $400 on your $1,000 — a 40% gain. Leverage looks wonderful.
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Put in $1,000, borrow $1,000, buy $2,000 of stock. The stock rises 20%: you make $400 on your $1,000 — a 40% gain. Leverage looks wonderful.