Accessing a higher exposure than the amount of money originally invested. People often talk about leverage as a way of gaining a large exposure to a market with a small outlay. It’s built into some financial products such as options and Contracts for Difference (CFDs).
A typical leverage product most Australian use is home loans. For example with 20% outlay ($100,00) what is called an initial deposit. An investor can purchase a house that is $500,000 worth and have exposure to price movements of the entire house.
If all goes well, the final return could be much greater than your initial cash stake. But if it all goes wrong, then so could your losses.
Leveraged products are not recommended for new investors as profits and losses are multiplied small mistakes can result in major losses.