What does it mean to leverage an investment?

To leverage an investment means to use borrowed capital to increase the potential return on an investment. This strategy allows investors to multiply their buying power, enabling them to invest more than they could with their own funds alone. By using debt, investors can enhance their exposure to the markets and potentially reap higher returns. However, leveraging also comes with increased risk; if the investment does not perform well, losses can be amplified because the borrowed amount must still be repaid.

Investing in multiple asset classes and minimizing risks are strategies to diversify or protect an investment portfolio but don’t specifically relate to leveraging. Additionally, investing personal savings into stocks refers merely to the action of purchasing shares and does not involve the use of borrowed funds. Therefore, the concept of leveraging directly relates to the use of borrowed capital, making it the correct answer.