Understanding Leverage

Leverage allows individuals and businesses to maximize potential returns by borrowing against assets to increase their purchasing power. For example, in real estate, investors can buy properties by putting down a fraction of the total price while the bank covers the rest. This approach can lead to substantial profits if property values rise, as one can repay the borrowed amount and retain the increased value. The concept of leverage can be likened to a bongo board, where a small force can create a significant effect, demonstrating how strategic borrowing can enhance financial outcomes.