What is leverage?
Leverage — or gearing — means investing more money than you have; the rest is borrowed. If you put in 1,000 and invest 3,000, you are leveraged 3 times. If the stock rises 10%, you make 300 on your 1,000 — 30%. If it falls 10%, you lose 30%. If it falls 34%, your own money is gone. Leverage multiplies everything: the gain, the loss and the speed at which it goes wrong. It is the most effective tool that exists for losing money quickly.
You stake more than you have. Everything is multiplied — including the loss.
A worked example
You have 1,000 and leverage 3 times: you invest 3,000, of which 2,000 is borrowed.
| The stock | Without leverage | With 3× leverage |
|---|---|---|
| +10% | +100 (+10%) | +300 (+30%) |
| −10% | −100 (−10%) | −300 (−30%) |
| −34% | −340 (−34%) | −1,020 (everything — and a bit more) |
And on top of that you pay interest on the 2,000 you borrowed — typically 5–10% a year. So the stock has to rise just for you to stand still.
Where leverage hides
- Leveraged ETFs ("2x", "3x", "Leveraged" in the name): Give two or three times the index's daily move. Over weeks and months they lose value in sideways markets, even when the index ends up in the same place. They are built for day trading, not for owning.
- CFDs and certificates: Bets on the price with built-in leverage, often 5–20 times. Can lose more than the deposit. European regulators require a warning that most retail clients lose money on them — and they do.
- Margin (buying on credit): Your broker lends you money against the stocks as collateral. If they fall far enough, the broker sells them automatically — a margin call — typically at the bottom.
Why it is not for beginners
Without leverage, a stock can fall 50% and recover — you just have to wait. With leverage you are forced out along the way, and then there is nothing left to recover with. Leverage removes the one advantage a private investor has: time. Most experienced investors never use it. That is not cowardice. It is maths.
The typical beginner's mistake
Buying a "3x" ETF on an index you believe in and keeping it for a year. The index ends +5%; the ETF may end −10%, because the daily leverage eats value every time the market swings back and forth. The product did exactly what it promised. It just was not what the buyer thought it promised.
How you see it in Kiggo
Kiggo recognises leveraged ETFs and says so clearly on the fund's page: what "2x" means, and that the fund is built for days, not years. Kiggo gives no long-term assessment of such products, because it would make no sense. Kiggo does not trade and offers no leverage.
Related terms
Frequently asked questions
Can I lose more than I put in?
With ordinary stocks and ETFs: no, never. With margin, CFDs and certain certificates: yes. Check whether the product has "negative balance protection" — most leveraged products for retail clients in the EU have it today, but not all.
Is a leveraged ETF dangerous?
Not in itself — it does what it says. The danger is that it does not do what people think: it multiplies the day's move, not the year's. Over longer periods it typically loses value relative to what you expect.
What is a margin call?
When your broker demands that you deposit more money because your leveraged stocks have fallen — and otherwise sells them for you. It typically happens when the market is lowest and you least want to sell.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
