Hello,
Can anyone explain homemade leverage to me with an example? I am confused by this concept.
E.g.: You want to increase the return of your investment in the equity of Apple. You borrow money (leverage) to purchase additional shares.
“Homemade” because you the shareholder in this example leveraged your equity position by purchasing additional shares with borrowed funds versus the company financing its investments/asset purchases by increasing its leverage.
Similar to homemade dividends where an equity investor can sell some of their shares in order to yield cash to their portfolio versus the company making the dividend payment.
I hope that helps!