Investing

How many of you actually use margin/leverage for your investments?

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  • Jan 21st, 2022 6:45 pm
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Jr. Member
May 10, 2011
112 posts
43 upvotes
GRIMSBY

How many of you actually use margin/leverage for your investments?

Just curious.
187 replies
Deal Fanatic
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Jan 16, 2011
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The NORTH
No... But strongly considering it.
Deal Addict
Feb 26, 2017
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I use leverage. I lost money the first time but its overall worked out pretty well since then. Its not a great feeling when a leveraged portfolio is down and I like to keep the amount small now. If your using margin instead of LOC you should track how close you are to a margin call and have a plan if you need to bail out the account.

Here are some existing threads about leverage that are active.

avoiding-stupidity-leverage-2201949/
home-equity-leveraged-dividend-growth-i ... d-2455354/
Deal Addict
Jul 13, 2007
1171 posts
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Toronto
I don’t but the companies I invest in all do.
Jr. Member
Oct 15, 2008
176 posts
186 upvotes
Mortgage free, 10% portfolio leveraged via HELOC. Utilize IB margin occasionally
Member
Sep 25, 2009
489 posts
389 upvotes
Pulled my HELOC first time in my life last year (About $100k).

When Bank stocks plummeted (June-November) I bought a few banks at their low points throughout that time period. My heloc is at prime (2.45%), and my dividend yield for the banks I purchased are all close to 7%. Definitely lucked out on this one.
Deal Addict
Nov 9, 2013
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Edmonton, AB
A little bit ya.
Keep calm and go long
Sr. Member
Dec 26, 2019
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I pulled my HELOC + ULOC + Brokerage Margin last Spring to buy Canadian dividend payers, using dividends to pay off the interest, and eventually the loan (dividend yield = 6.3%). I don't plan on taking on any more debt now as the market is at all time highs, but with these low interest rates, I have no plans on paying down my debt either.

I plan to use a little bit additional margin for shorter-term trades (ie. plan to buy and sell within months) if I see a deal. I haven't done this yet, but I have targets and an action plan drawn up for when the time comes. If the time never comes, then I'm happy letting the good times roll.
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Apr 25, 2006
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I do when I trade.
"If you make a mistake but then change your ways, it is like never having made a mistake at all" - Confucius
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Jun 28, 2018
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Toronto
For about 4 years I have been running an almost continuous margin balance for my medium to large cap dividend portfolio that currently pays for itself. Along with some added option writing to boost repayment.

Got into a margin call once, but kept better track of things since then.

Using debt for trading or investing is definitely not for everybody as it entails a much higher amount of risk. I could feel stress from it back then, until I got a better hold and comfort of everything. When the market crashes it sucks even more, though for the last crash 2020 my portfolio was better prepared.

Currently, focusing on slowly repaying to eventually go to near zero or zero. Without adding extra cash + trades. Using dividends alone, not counting interest payments, the portfolio will self repay around 4.5 years. If I start pulling out TFSA dividends then 3.5 years .
The Distracted Investor

Dividends through quality companies 😃 Though I usually lose money with trades :facepalm:
Sr. Member
Feb 8, 2015
618 posts
682 upvotes
Kanata
johnnychi wrote: For about 4 years I have been running an almost continuous margin balance for my medium to large cap dividend portfolio that currently pays for itself. Along with some added option writing to boost repayment.

Got into a margin call once, but kept better track of things since then.

Using debt for trading or investing is definitely not for everybody as it entails a much higher amount of risk. I could feel stress from it back then, until I got a better hold and comfort of everything. When the market crashes it sucks even more, though for the last crash 2020 my portfolio was better prepared.

Currently, focusing on slowly repaying to eventually go to near zero or zero. Without adding extra cash + trades. Using dividends alone, not counting interest payments, the portfolio will self repay around 4.5 years. If I start pulling out TFSA dividends then 3.5 years .
How much margin as % of portfolio?

You got a margin call? So you had to sell at the bottom?
Sr. Member
Feb 8, 2015
618 posts
682 upvotes
Kanata
This a interesting question because:

-HELOC/Mortgage are not margin. Instead buying a home with 100% down and then investing in margin...why not just buy a home at 20% down and leaving your portfolio invested? (That's around $300K-$500K in leverage depending on your income)

-Student Loan is not margin and same logic as the above (That's another $50-$150K depending on your tuition costs)

-Unsecured LOC at low rates is not margin either (That's another $30-$150K depending on your credit score,income)


In fact you have many avenues to increase leverage without resorting to margin. If you have used all the options above and you STILL want to use margin, it better be a low % or you will risk ruining yourself into bankruptcy.
Last edited by garmium on Aug 12th, 2021 11:55 am, edited 1 time in total.
Sr. Member
May 5, 2016
527 posts
541 upvotes
I do, i've been burned really bad during the March Covid crash but its also accelrated my gains in other scenarios. During the covid crash i had some of my positions liquidiated because you can't fund your accounts instantaneously on IBKR, i knew i was at risk and tried to make deposits as soon as i could but it takes 3 days for the cash to clear and it was too late at the time.
Sr. Member
Dec 26, 2019
723 posts
1246 upvotes
For those of us using brokerage margin
- Understand what drop you can withstand. Personally, I can withstand a 60% drop before getting margin called. I won’t go below that. And understand the volatility if your stocks.
- If the market starts to slide, have a plan and take action ASAP. I have 2 unused ULOCs and a HELOC ready to use. I know it takes 3 days, so I need to stay on top of it.
Deal Addict
Feb 26, 2017
2562 posts
3641 upvotes
garmium wrote: This a interesting question because:

-HELOC/Mortgage are not margin. Instead buying a home with 100% down and then investing in margin...why not just buy a home at 20% down and leaving your portfolio invested?

-Student Loan is not margin and same logic as the above.

-Unsecured LOC at low rates is not margin either


In fact you have many avenues to increase leverage without resorting to margin. If you have used all the options above and you STILL want to use margin, it better be a low % or you will risk ruining yourself into bankruptcy.
The student loan seems stands as a bad idea :).

Overall to me the idea with margin or LOC is still the same as you could pay off your margin account with a LOC. I think it depends on what is most convenient and where your getting the best rates. For me the best rate is my margin account at 4% unless I take out a balance on my LOC. I'm looking to pay off my margin in about 3-4 months so I don't see much point in taking one of my balance offers.

I think 1.5x is pretty safe with a margin account as you would be 52% away from a margin call.

Investments Margin Equity Margin Rate Margin Call
100,000 33,500 66,500 1.50 52%
Sr. Member
Oct 25, 2009
937 posts
1238 upvotes
always been on margin, just don't be stupid with it and know your risks
Last edited by dpwr on Aug 12th, 2021 1:58 pm, edited 1 time in total.
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Jan 23, 2011
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My broker cash balances are always around $-1200 because banks generally don't charge interest when less then $5. I have multiple accounts and with CAD and USD both carrying approx $-1200 each across all the accounts, it is like interest free money.

I also find it useful that margin account interest rates are much lower than those of cash accounts. So in the event of any miscalculation on my part, I won't be dinged as much. But I always make sure to restore them back to $-1200 to avoid the interest.

Does anyone know if margin calls affect credit scores?
Sr. Member
Jan 26, 2020
640 posts
155 upvotes
Canada
Probably a lot more are drawn into it now that interest rates are lower. But its a fool's proposition. Its hard enough making money without having a clock ticking. Probably the greatest tool an investor has is patience. But when interest is incurring, your patience wears thin. Its a terrible combination. Every investor can look back and see times they traded and right after that it would have been much better. If only they had the patience to wait for it to go lower to buy and go a little higher to sell. If only they had waited just a little longer.
Sr. Member
Jan 26, 2020
640 posts
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Canada
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