Borrow to get ahead

Borrowing to invest is par for the course for many Australians: achieving the dream of owning your own home requires, in most cases, a loan. But should you borrow for other investments?

Borrowing provides the potential, but not a guarantee, of generating greater profits than you would if you only used your own cash. In a perfect world, it will see you make money using someone else’s money.

For instance, 15% growth on a $1000 investment funded with your own money is $150 in capital gains. However, borrowing another $1000 to invest doubles this gain. In addition, larger initial investments will compound to larger returns sooner.

Borrowed funds can also provide benefits that partially mitigate risk in your portfolio by lowering concentration risk