The Biggest Leverage Risk Isn’t in the Market

Every time there’s a raging bull market in stocks, as there is now, people start worrying about too much leverage in the market, and for good reason. When investors chase stocks with borrowed money, bad things can happen. Here’s the danger:

Leverage is not necessarily bad. A measured amount is manageable and can enhance the return of a portfolio. Even Warren Buffett, who is famously averse to investing with borrowed money, has Berkshire Hathaway Inc. levered about 18% based on the company’s debt-to-equity ratio.