Borrow to invest: The ups and downs of leverage in your portfolio

Borrowing money today to invest in the future is a strategy many successful investors have used at the advice of their advisor to reach their personal and financial goals—whether it’s buying a house, paying for an education or starting a business.

A less common, but equally forward-looking strategy for some, is borrowing to build an investment portfolio that includes stocks, bonds and investment funds.

Taking on debt to secure investments may seem counterintuitive to some but the potential returns may be lucrative if done strategically, says Tony Maiorino, vice president and head of the Family Office Services team at RBC Wealth Management Canada.“Borrowing is something people do every day—for a car, a home or a vacation property,” says Maiorino. “The question is, should you borrow to invest money in the markets? The answer to that question is much more complex.”

Borrowing to invest means you can deploy large amounts of capital either all at once or over a period of time. The interest, for those investing in publicly traded securities, may also be tax deductible. One risk is an investment made from borrowed money may drop in value, which could be less of a concern if it’s a long-term move. Additionally, the cost of the loan over time may become higher than the profit made from it.

Maiorino says investors looking to leverage their investment portfolio need to ensure this strategy meets their overall financial goals, and tolerance for risk. This is best done with the support of an advisor who can provide the advice and guidance necessary to make impactful investment decisions.

“Done in a diversified and careful way, borrowing to invest can be as valuable as investing in a home over the long term,” he says. “To me, it’s about the individual and ensuring the strategy is right thing for them.”

Starting early to build wealth

Borrowing to invest can begin even before someone has built up a sizeable investment portfolio, Maiorino says. For instance, an investor in their 20s or 30s might consider borrowing to contribute to a registered retirement savings plan (RRSP) each year. Deductible RRSP contributions can be used to reduce personal income tax.

Investors can then use their tax refund to repay a portion of the loan and then, ideally, work to repay the remainder later in the year, Maiorino says. The process can then be repeated to help build wealth over time.

“If you can afford it, and can make the payments, it can be an effective approach,” says Maiorino.

“The one thing you can’t get back is time,” Maiorino says. “If you start retirement savings at age 25, by the time you’re 35, you’ll have 10 years of investments,” plus any accumulated growth. “That’s something a person who starts investing at age 35 is never going to have.”

Borrowing to grow your wealth

While affluent Canadians typically don’t have to use credit, they often choose to use it to their advantage. “High-net-worth clients tend to use it on a discretionary basis to create more wealth,” says Kim Mason, executive vice president and head at RBC Private Banking.

For example, clients with significant home equity might leverage it to buy an investment property or help their children purchase their first home in high-cost markets like Toronto or Vancouver, she adds.

Another advantage to borrowing against a portfolio is there’s no formal credit application and the loan can be provided relatively quickly.

Developing a long-term investment strategy

Whether borrowing to invest is the right strategy depends on the investor’s longer-term objectives, Maiorino says.

For instance, leveraging an investment account might make sense for a millennial investor saving for retirement decades down the road, or a baby boomer setting up an investment account for their child to access when they’re an adult. “You have to have a long-term approach,” Maiorino says.

Investors should also understand how the markets work, including the potential for extreme volatility. Someone who panics when they see the markets drop may not be well-suited for the strategy, Maiorino cautions.

Asking for professional advice

Maiorino recommends people seek advice from qualified professionals when borrowing to invest, given the complexity and risks involved. An advisor can help determine whether the approach is recommended based on the investor and their unique objectives and goals. They can also ensure the investor is properly diversified in case some of their assets decrease in value over time. He also recommends seeking out tax advice should you be looking to deduct the interest on the investment loan.

“An investment may seem affordable today, only to discover that it becomes a lot more affordable in a year,” Maiorino says. “It’s important to work with people who’ll help you build a diversified portfolio that will, ideally, insulate you from losses over the long term the best way they can.”

In the end, the decision of whether to borrow to invest comes down to an individual’s financial circumstances, needs and goals, as well as their risk profile.

This article was updated in July 2025.