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Moneyextra.com Dictionary
Gearing
Gearing is strictly-speaking the percentage of borrowing relative to assets.
So in simple terms if you own a home worth £100000 and you have a mortgage outstanding of £50000 your gearing is 50. In the sphere of collective investments investment trusts can borrow money gear up whereas unit trusts are not permitted to. Split Capital Investment Trusts have structural gearing because they contain different classes of share with different entitlements. Gearing called leverage in the U.S. needs to be managed carefully - it can at best enhance investment returns - and at worst increase losses. ©Moneyextra.com Moneyextra.com recommends you take independent financial advice before acting on any article 2009-02-17 00:00:00 © Moneyextra.com