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The decision for the right investment is based on three fundamental factors:
yield, security and liquidity. The significance of these three criteria can
be used to determine which form of investment is best suited for your ideas.
In principle, one of the three criteria must always be subordinated to the other two. This is because there is no investment strategy that can equally satisfy all factors.
In principle, one of the three criteria must always be subordinated to the other two. This is because there is no investment strategy that can equally satisfy all factors.
The leverage effect refers to the effect of the leverage of borrowed capital on the profitability of equity. You therefore have the opportunity to increase the return on your equity capital by taking up outside capital. The prerequisite for this is that the return on your investment must be higher than the interest on borrowed capital.
Attention! The leverage works just as well in the negative direction: if the return on the investment falls, the cost of borrowing increases. And these then have to be paid out of your own pocket. This negative effect is particularly noticeable when investing in stocks, as the fluctuations on the stock market can be large and unpredictable in the long term.
In order to be able to achieve a long-term and secure positive leverage effect, a real estate investment is ideally suited thanks to low fluctuations in value and precise predictability.
Attention! The leverage works just as well in the negative direction: if the return on the investment falls, the cost of borrowing increases. And these then have to be paid out of your own pocket. This negative effect is particularly noticeable when investing in stocks, as the fluctuations on the stock market can be large and unpredictable in the long term.
In order to be able to achieve a long-term and secure positive leverage effect, a real estate investment is ideally suited thanks to low fluctuations in value and precise predictability.
