Using Margin

Leverage can be a powerful financial tool when used wisely — but it also comes with real risks that every investor should understand before borrowing money to invest. This comparison illustrates two very different outcomes using the same margin strategy: one where market returns outperform borrowing costs and significantly boost overall returns, and another where lower market performance causes interest costs to eat away at profits. By understanding both the upside potential and the downside risks of leverage, investors can make more informed decisions about whether margin investing fits their financial goals, risk tolerance, and long-term strategy.

Leverage investing is based on a simple concept: borrowing money at a lower cost and investing it into assets that have the potential to generate a higher return. This example illustrates how margin can amplify income and overall returns when investment performance exceeds borrowing costs. While the strategy can create meaningful cash flow and increase market exposure, it also carries important risks — including market volatility, changing interest rates, dividend reductions, and the possibility of margin calls. Understanding both the opportunity and the risk is essential before using leverage as part of any long-term financial strategy.

Before trusting someone else with your financial future, it’s important to remember that no financial advisor has a crystal ball — and many are simply salespeople working within products, commissions, or company guidelines. While some advisors can provide value, today’s investors also have access to an incredible amount of free financial education online, including market research, investment tools, podcasts, videos, books, and real-time data that previous generations never had. The more you educate yourself, the better equipped you are to ask smart questions, recognize bad advice, understand risk, and make informed decisions about your own money instead of blindly relying on someone else to do it for you.

A lot of people proudly say they “have a guy” managing their money — but too often, that simply means they’ve handed control of their financial future to someone they barely understand. The reality is that many financial advisors get paid regardless of whether your account goes up or down, and some earn fees simply for keeping your money invested in products that benefit them more than you. If these advisors truly had a foolproof path to wealth, it’s fair to ask why they’re still spending every day selling financial products and managing other people’s accounts instead of quietly living off their own fortunes. That doesn’t mean every advisor is dishonest or unhelpful, but it does mean investors should stop blindly trusting “their guy” and start educating themselves, asking hard questions, and taking a more active role in understanding their own money.