Limited to your slowly accumulating savings, you are initially restricted to a narrow asset base. Investing with borrowed funds is like sliding into second or third gear. Instantly, you have the power to buy assets that were otherwise unattainable - a bigger house, a portfolio of shares or a diversified range of managed funds. You are driving at top speed. But just as speed can be harmful to an inexperienced driver, gearing to invest can be a costly exercise for a novice investor.
Investors generally gear into shares and property to boost returns.
Another advantage of gearing is that you can claim tax deductions - negative gearing. This occurs when expenses associated with an investment outweigh the income received. In the case of an investment property, the shortfall between rental income and the costs of the loan is tax deductible. When gearing into shares, the gap between dividends received and interest paid on the loan can be used to reduce tax. Often people go into margin lending very focused on the tax outcomes and I think that tax is a secondary issue.