Business and Investing Leverage
February 06, 2008
Business and Investing Leverage
By: Debbie Amon
Leverage is a means of multiplying the positive effect of one's efforts. A simplified way of saying it 'Working smarter rather than harder' and the results can be magical.
Leverage helps you build your business or reach financial goals beyond what you could accomplish alone. Leverage comes in many forms: such as systems, tools, people, time, and financial.
The important thing for you is to consider new or better ways for you to tap into the power of leverage to accelerate the achievement of your various goals.
Career or Business Leverage:
Business owner VS employee. Do you have a job? Well, the owner of your company is using you as leverage. Rather than do the work that you do, the owner of the company pays you to do it and earns income from each employee. It is likely the owner has leveraged the efforts of many employees.
To use leverage to create your own wealth clearly you need to be a business owner and not an employee. Did you know that close to 90% of all people earning over $100,000 per year are running their own business and that the Home Based Business market is growing at around 12% per year?
Time Leverage:
Time is said to be our most precious commodity. So why is it so many of us devote our precious time to building our bosses dream instead of our own? Even if a person is 'too busy' – there is time to start a Home Based Business. It is all about understanding leverage and priorities. Reading a good book on Time Management is the place to start since we are already so busy (and perhaps not to effective) with our time.
Investment/Financial Leverage:
This is a way to use other people's money to achieve your investment goals at a faster rate. Usually borrowed capital, such as margin, is used to increase the potential return of an investment.
You may have already taken advantage of this strategy by taking out a mortgage to achieve your goal of home ownership or student loan to achieve higher education.
Financial Leverage can also be generated using stock options, real estate, futures, the FOREX (Foreign Currency Exchange), and other financial instruments.
Stock Example: If you've traded stocks, you may know that you can get up to a 2:1 margin on your account value through most brokers if you have sufficient money. Put a different way, most stock brokers will let you buy $50,000 worth of stock for every $25,000 in your account...loaning you $25,000 in what is known as 'margin' (leverage).
Real Estate Example: A Real Estate Investor uses OPM (Other People’s money) to leverage their purchasing/profit. If we bought a $200,000 house with a 10% Down Payment of $20,000; we would be utilizing a 10 to 1 leverage ($20,000 x 10 = $200,000). If the house increased in price to $220,000. when we sold it we would have made 100% profit on our $20,000.
FOREX Market Example: The FOREX (Foreign Currency Market), is the largest financial market in the world. Comparing the Real Estate market to the FOREX Market with leverage as high as 400 to 1, we could buy that same $200,000 house with only a ¼% down payment of just $500 ($500 x 400 = $200,000). If the house increased in price to $220,000, we would have made a 4,000% profit on our $500. THAT’S Leverage power at its best!
Forex brokers are by far the most generous source of Leverage in the financial markets and this can generate amazing income potential when used with the right system.
Naturally all financial vehicles also contain risk – but in my opinion the biggest risk is to keep your money so 'safe' that it fails to work for you.
I am a firm believer in using both Business & Financial Leverage to create time freedom and financial freedom.
By: Debbie Amon
Leverage is a means of multiplying the positive effect of one's efforts. A simplified way of saying it 'Working smarter rather than harder' and the results can be magical.
Leverage helps you build your business or reach financial goals beyond what you could accomplish alone. Leverage comes in many forms: such as systems, tools, people, time, and financial.
The important thing for you is to consider new or better ways for you to tap into the power of leverage to accelerate the achievement of your various goals.
Career or Business Leverage:
Business owner VS employee. Do you have a job? Well, the owner of your company is using you as leverage. Rather than do the work that you do, the owner of the company pays you to do it and earns income from each employee. It is likely the owner has leveraged the efforts of many employees.
To use leverage to create your own wealth clearly you need to be a business owner and not an employee. Did you know that close to 90% of all people earning over $100,000 per year are running their own business and that the Home Based Business market is growing at around 12% per year?
Time Leverage:
Time is said to be our most precious commodity. So why is it so many of us devote our precious time to building our bosses dream instead of our own? Even if a person is 'too busy' – there is time to start a Home Based Business. It is all about understanding leverage and priorities. Reading a good book on Time Management is the place to start since we are already so busy (and perhaps not to effective) with our time.
Investment/Financial Leverage:
This is a way to use other people's money to achieve your investment goals at a faster rate. Usually borrowed capital, such as margin, is used to increase the potential return of an investment.
You may have already taken advantage of this strategy by taking out a mortgage to achieve your goal of home ownership or student loan to achieve higher education.
Financial Leverage can also be generated using stock options, real estate, futures, the FOREX (Foreign Currency Exchange), and other financial instruments.
Stock Example: If you've traded stocks, you may know that you can get up to a 2:1 margin on your account value through most brokers if you have sufficient money. Put a different way, most stock brokers will let you buy $50,000 worth of stock for every $25,000 in your account...loaning you $25,000 in what is known as 'margin' (leverage).
Real Estate Example: A Real Estate Investor uses OPM (Other People’s money) to leverage their purchasing/profit. If we bought a $200,000 house with a 10% Down Payment of $20,000; we would be utilizing a 10 to 1 leverage ($20,000 x 10 = $200,000). If the house increased in price to $220,000. when we sold it we would have made 100% profit on our $20,000.
FOREX Market Example: The FOREX (Foreign Currency Market), is the largest financial market in the world. Comparing the Real Estate market to the FOREX Market with leverage as high as 400 to 1, we could buy that same $200,000 house with only a ¼% down payment of just $500 ($500 x 400 = $200,000). If the house increased in price to $220,000, we would have made a 4,000% profit on our $500. THAT’S Leverage power at its best!
Forex brokers are by far the most generous source of Leverage in the financial markets and this can generate amazing income potential when used with the right system.
Naturally all financial vehicles also contain risk – but in my opinion the biggest risk is to keep your money so 'safe' that it fails to work for you.
I am a firm believer in using both Business & Financial Leverage to create time freedom and financial freedom.
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