What is leverage?

According to financial terminology leverage used by financial institutions is considered to be the borrowing of funds at a certain ratio. This borrowing ratios can be used by institutional investors as a way of generating even more profit in the process of investing. History has flaunt that leverage can be advantageous and disadvantageous. Leverage has provento increase the risk of investment portfolios by the same ratio of advantage it provides to investors. However when used approprirately can bring good fortunes to an investors portfolio.Leverage is a neck and neck situation.Leverage has also proven vise versa that its proper use can irrupt a portfolios ratio of profitability. Leverage is when one uses extra eclectic proceeds to generateinvestment profits. Normally leverage is used by those who have something to put on the table. You funding your brokerage account demises you access to leverage. If you buy a stock price at $12 per share and your trading account has $100, youcould put $12 to buy 3 shares of the company, but you normally do not receive dividends for the 2 share of borrowed proceeds; you receive only dividends for one share. However when you sell your shares you will perpend for the profits or loses forwhich your share prices value has changed.Leverage is one of the primeval calprits that caused the 2008 financial crisis. Many institutions used proceeds of borrowedmoney to purchase and hold financial securities which were soon going to be below the value of their initial buying period.This instruments devaulued the balance sheets of many companies that held assets in the in the housing market. The housing market was a bubble primarily because it was financed by borrowed proceeds which were later futile in a market that dearth liquidity and was financed by the printing of money and quantitative easing. To get the go by of utilizing leverageas an investor is also quite salutiferous.