It is a difficult time for investors, given economic growth is muted and interest rates are at all-time lows. In this environment, many investors search for other ways to produce a return. In a low-rate world, borrowing to invest looks good on paper.
But borrowing – or leveraging – into investments can be a high-risk strategy. For instance, many investors, especially those in margin loans, had their fingers burnt during the financial crisis of 2007/2008. As a result mum and dad investors walked away from leverage as their risk appetite substantially contracted.