Please stay tuned for important disclosure information at the conclusion of this episode.

Welcome to Investing Insights. I'm your host, Ivana Hampton. Leverage can magnify a portfolio's

performance, or better or worse. Poor results have sunk many leveraged ETFs.

So how can investor use leverage to optimize their investments instead of destroying them?

Brian Armour is the director of Passive Strategies Research for North America for Morningstar

Research Services. He's also the editor of Morning Star's

ETSF Investor newsletter.

We talked about a better way to use leverage.

Great to see you, Brian.

Yeah, thanks for having me.

Let's start today with what is leverage

and why does it have a debatable reputation?

Yeah, leverage basically is borrowing money to invest.

And so obviously that ends up magnifying returns because you're using less money to gain more exposure,

which is effectively what leverage is. And leverage comes at a cost.

And so obviously, when you're borrowing from someone, they want to make money lending it to you.

They also want to make sure that they don't lose their money. And so there's risks on their

side as well as yours.

And so one of the issues is when markets sour,

then they're more likely to want their money back.

And so that can end up having a compounding effect is your investments losing money.

And it also becomes more expensive to employee leverage. And so

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