Borrowing is viewed by many investors as a last resort, for emergencies only. Debt comes at a price, since creditors demand to be compensated, and there can be significant risks if you're not able to repay on time. But while it might seem counterintuitive, borrowing is often a vital tool for wealthy individuals.
The risks and costs of borrowing are well-known, but its benefits are often overlooked. Although borrowing doesn't directly generate returns, it can facilitate gains and enable investors to avoid locking in temporary losses. It can also be used to help secure liquidity, increase diversification, improve return potential and mitigate taxes. In a new issue of Investment strategy insights , our strategists in the UBS Chief Investment Office explore how leverage can be a valuable part of a sensible financial strategy. Read the paper to learn:
- Why wealthy investors may want to consider borrowing
- How debt can be a tool to help investors meet their financial goals
- How the costs and risks of borrowing can be managed, not avoided
If used imprudently, debt can be ruinous. But by thinking proactively, investors can use borrowing as an alternative to selling assets at bear market prices, which could in turn significantly amplify return potential in the first stages of a recovery period.
Read the full report to learn more.