Comments on: Margin Can Make you Rich…or Really Really Poor

By: mike

mike — Thu, 25 Feb 2010 00:14:38 +0000

Jason- you’re going to lose your shirt. It is never a good idea to consolidate your account into a single sector. You are counting only the gains and not the potential losses. If anything- anything- rocks the boat on your stocks your losses will increase exponentially. You will get a margin call, be unable to cover it, be forced to sell shares at a major loss and so on. It will cascade into an avalanche of disaster. Just my .02

By: Jason

Jason — Wed, 03 Feb 2010 05:56:43 +0000

I’m messing around with Margin right now for the first time. I have about 220K Equity in my account so they have given me that much to use for Margin Buys.

So far I have used 150K of my Margin to buy 50K each of MFA, HTS, and ANH. Those 3 stocks paid 15% Divs last year and should continue this year since they pay Divs based on low Mortgage Rates.

My plan is to migrate the rest of my account over to Those 3 stocks as well as add to the account throughout the year. The Divs will be 22500 for the year assuming I can’t make the migration and I’m only working with 150K at 15% (Also assuming that rate will be the same).

What I want to see happen by the end of the year is to have 350K in those 3 stocks, that will gross 52500K in Divs, and I can continue to use my margin account to load up on those 3 at attractive times in the future to either average down my positions or simply add more shares and rely on the Divs to pay for it all.

If anyone has any comments I’d love to hear them.

By: Mike

Mike — Mon, 25 Jan 2010 10:08:16 +0000

I have bought $20k worth of dividend stocks on margin in an account that had over $100k of equity– so, i.e., I had only about a 20% margin percentage.

I did it because I thought the stocks were well priced (not screaming buys) and were paying a 3.7% yield when the margin interest rate was quite low (about 1.4%).

It worked out– not spectacularly, but solidly.

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By: Stefan

Stefan — Wed, 30 Apr 2008 22:23:27 +0000

Buying on margin is good even for buy-and-hold investors during a market correction, when many stocks are “on sale” and it’s a good opportunity to use the margin as a short-term “buffer” until you get more cash.