What is the common use of leveraged investments?

The common use of leveraged investments is primarily to increase the potential return on investment. Leveraging allows investors to borrow funds to amplify the amount they invest, which can result in significantly higher gains when the investment performs well. For example, if an investor uses leverage to purchase more of an asset than they could afford with their own capital alone, any increase in the asset's value is magnified, leading to a larger profit compared to a non-leveraged investment.

This strategy comes with increased risk since losses are also magnified if the investment value decreases. Therefore, while the potential for higher returns is attractive, it is essential for investors to carefully consider their risk tolerance and market conditions when using leverage.