The term 'levered' describes a financial strategy or state where an individual, company, or investment employs a significant amount of borrowed capital (debt) to amplify potential returns. This can be used for assets like stocks, property or entire businesses. The aim is to enhance profitability, but it also elevates the level of financial risk. High leverage magnifies both gains and losses; a small change in underlying asset value can have a considerable impact on returns and potentially lead to substantial debts or failures. This strategy hinges on the cost of borrowing being less than the return on the investment.
Levered meaning with examples
- The real estate company, levered with substantial mortgages, rapidly expanded its portfolio during the boom but faced extreme difficulty when the market faltered. This demonstrated the risks of relying so heavily on debt financing.
- Investors chose the levered ETF for its potential to provide amplified returns on tech stock investments, aware of the higher volatility that comes with this approach, and used it to hedge their investments.
- Due to the company's acquisition, it has a levered balance sheet. A sudden economic downturn is a serious threat due to the obligation to repay such significant debts.
- The fund manager decided to make a levered position in commodity futures, hoping to profit from predicted price increases, though this strategy has a potential for immense gains as well as extreme losses.
- During periods of low interest rates, many businesses find themselves levered by taking advantage of cheap borrowing options and are often encouraged to do so by their stakeholders.
Levered Synonyms
borrowed debt-financed geared highly-geared indebtedLevered Antonyms
cash-rich debt-free equity-financed low-geared unleveredLevered Crossword Answers
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