Leverage Calculators
Leverage investing.
Compare leveraged vs unleveraged portfolio outcomes. See how borrowing to invest amplifies both gains and losses, factoring in Canadian tax-deductible interest.
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How leverage amplifies returns, and losses
Leverage acts as a multiplier on both gains and losses. With a 2:1 ratio (borrowing an amount equal to equity), a 10% market gain becomes roughly a 20% gain on your equity minus interest costs; a 10% loss becomes roughly a 20% loss plus interest. CRA allows interest deduction (line 22100) when borrowing to earn investment income, reducing the effective borrowing cost.
Key risks: margin calls and forced selling, amplified drawdowns, interest-rate risk on variable-rate loans, and psychological pressure during downturns.
TNAADO Inc. · Toronto
Leverage multiplies the outcome, not the odds
Borrowing to invest raises the return on your own capital when the portfolio earns more than the loan costs, and lowers it when it does not, by the same multiple in both directions. The break-even is not simply the loan rate: it is the loan rate after any deduction for the interest, set against the portfolio return after tax and fees. A strategy that needs several good years just to clear that bar is a bet on sequence as much as on average return.
The mistake people make. Modelling an average return instead of a path. An investment loan does not care about the average. It demands its interest every month, including the months the portfolio is down 30%. Margin calls, forced sales at the bottom and the loss of the deduction when an asset is sold are all path events. Size the loan by what you could service through a bad three years, not by what the average return supports.
Disclaimer
Educational estimates only. Leverage investing can lead to losses larger than your initial capital. Consult a licensed financial advisor.