Leverage

Leverage magnifies both gains and losses. A sound policy states whether leverage is permitted at all and, if so, the limits and loan-to-value within which it may be used.

Leverage flatters returns in good times and is unforgiving in bad ones, because it can force selling at the worst moment. For families whose priority is endurance across generations, the case for significant leverage is weak, and any use of it belongs in the policy with explicit limits.