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Still happy with margin borrowing???

Discussion in 'Business, Investment and Economics' started by nioka, Apr 1, 2008.

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  1. nioka

    nioka

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    I have never been a believer in borrowing on margins. I have posted before "never a borrower or a lender be".It is slower sometimes to get ahead by only investing your own savings but slow and steady wins the race. Debt has a habit of blowing out fast. It can multiply as debt faster than as credit. I have not always thought that way but some nasty experiences with borrowing over the years has shown me that debt can bite hard in times like we are in at the moment. When share prices go down the first drop is the portion you own, the next is the cost of interest and you get to keep what's left and sometimes that is a negative amount.
    So 'fess up, who is still happy to get with margin lending and who has learnt a lesson. Be honest, paper traders can also report.
     
  2. Rainmaker2000

    Rainmaker2000

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    Nioka, it's an interesting question.

    I agree that margin is not for everybody but I'm a strong advocate of a moderate use of debt to invest especially when interest rates are low.

    Over the long term, I see no reason why a good investor can not earn an average 20% return or something close to that...........if you use leverage with a cost of say 10% which about it is currently, in the long term you should be better off..........throw in the tax benefits and its even more attractive...

    Of course, no one likes leverage when its going downwards...hehe........but while a few weeks ago I started getting concerned about LVR, it has only taken a few weeks for my holdings to show some strength and I'm very content again with my ongoing use of debt to purchase a franked dividend stream.....and I've been able to pick up some bargains on the way down with debt....for example, I wouldn't have owned JST again without leverage

    We all use debt to buy the family home and its not even strictly an income producing asset.....why is lending for shares so much different?
     
  3. Spaghetti

    Spaghetti

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    No have not used margin lending to date.

    HOWEVER

    Will consider it when the market returns to a healthy state as by then may not have so much capital left to earn enough to live off!

    ATM mainly in cash which seemed like a good idea at the time, howver have to keep drawing it down to live off. I could get a day job I suppose.:eek:
     
  4. Knobby22

    Knobby22 Mmmmmm 2nd breakfast

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    Margin lending is great!.
    There is nothing wrong with using leverage to increase your profits and claiming the interest off your tax. The system is rigged to encourage borrowing.

    Now, however, interest rates are above 10% so it has less attraction.

    My saying below is relevant. The game shows how you can be rich by using margin lending however it also shows the importance of not getting greedy. A margin loan can wipe you out pretty quick if you don't treat them properly.
     
  5. Rainmaker2000

    Rainmaker2000

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    Agree with the Railroad Tycoon analogy and have recently played Railroad Tycoon 3 to re-aquaint myself with its lessons.........always load up on debt in boom times when debt is cheap.......always use margin to buy stock and buy back stock in depression......plus always build a post office to bolster mail freight...sorry, I digress
     
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