Should you Borrow to Invest?
As interest rates plateau and market volatility softens, more Canadians are asking: Should I consider borrowing to invest? The concept—known as leverage—isn’t new. But in 2025, it’s gaining renewed attention from individuals who want to accelerate wealth building, especially in long-term portfolios. Still, it’s a decision that demands a sober look at risk, timelines, and cash flow.
The Potential Upside
Borrowing to invest can be highly effective when:
- The expected investment return exceeds the cost of borrowing.
- You have consistent cash flow to cover loan payments, regardless of market swings.
- You’re investing for the long term (5+ years), where short-term volatility is less impactful.
- Example: A $50,000 line of credit at 6.5%, invested into a diversified equity portfolio with an 8.2% historical return, could yield meaningful growth—after interest, if markets perform.
The Risks are Real
Borrowing to invest can be highly risky when:
- Interest costs are non-deductible for registered investments like RRSPs and TFSAs
- If markets fall, you’re left with debt and losses
- Margin calls can occur if asset values drop significantly (in brokerage-linked loans)
- Psychological pressure—many investors sell too early when debt is involved
When it might Make Sense
- You’re a high-income earner with limited RRSP room
- You’ve maxed out TFSA and RRSP but still want to invest tax-efficiently
- You have a stable, predictable income and high risk tolerance
- You’re investing in non-registered accounts, where interest may be tax-deductible
When Should You Avoid it?
- Your income is variable or unstable
- You are planning for short-term goals eg. home down payment, tuition
- You don’t have a cushion for interest costs or market losses
- You are not confident in your ability to emotionally weather volatility
In Conclusion, Borrowing to invest is not for everyone—but for the right profile, it can be a smart acceleration tool. We recommend a comprehensive risk assessment and cash flow review before any leverage strategy is implemented. Let’s help you answer the question not just in theory—but for your specific situation.
The information provided is for educational/entertainment purposes only. Actual information may vary, please consult our office for further details. Got a question? Feel free to reach us at helpdesk@assentt.com.
