Comments on: When Should You Use Margin When Investing?

By: Jeff Rose

Jeff Rose — Sun, 29 Apr 2018 16:57:05 +0000

In reply to Javier. Here's how it works Javier...Margin can't exceed 50% of the purchase of the securities you're buying. In order to buy $1,000 of stock on margin, you'd have to have at least $500 in the account, with $500 in margin used on the purchase. The margin call would have to be met out of other available funds if it becomes necessary.

By: Javier

Javier — Fri, 20 Apr 2018 04:54:25 +0000

Jeff,

I was thinking about buying stocks on margin. I don’t want to put too much money at risk. I agree with your comment at the end and don’t wan to use more than 10% of my asset value as margin. However, I could not find enough information to make a decision. For example, let’s say that I have a portfolio of $10,000 and want to buy more shares but want to use margin for that. Can I just borrow $1,000 to buy $1,000 worth of shares without putting money? Can I use all my portfolio as collateral ($11,000 after purchase)? I have seen that the excess is maintained in a SMA, so I’m confused and this can’t be used to meet the margin call (only cash).

By: Jeff Rose

Jeff Rose — Sat, 03 Mar 2018 17:32:28 +0000

In reply to Doug Grant. Good move Doug. Margin can double your returns on the way up, but it can come close to wiping you out if it breaks against you.

By: Doug Grant

Doug Grant — Wed, 28 Feb 2018 11:07:24 +0000

Thanks for the information even though your article is 6 years old the advise is relative still for March 1st 2018.. To the day of your posting exactly 6 years———————————————————————————————————-
I have used margin to buy stock on some occasions and up to this point I was considering buying 300 more shares of BAC on Margin for a long position and that’s why I read your article so I could decide if its the right choice for me.. After reading I’ve decided not do it.. From what I have gathered from your blog Margin should only be a means for getting cash at the moment you don’t have any other avenue to borrow money or when you are between pay checks; also when you borrow using margin you should pay it off as soon as you are able.. Interest Debt can be accumulative problem…Sooner paid off the better!!!
Thanks
Doug

By: Evan

Evan — Wed, 07 Mar 2012 05:35:31 +0000

Jeff, Fantastic explanation of when to use the margin account without deferring to the often spewed, “don’t do it b/c its risky.”

I actually using my margin abilities for the exact reasoning you highlight in #1. For example, today the market was down 200 points or so and since I don’t keep cash in it, I had to use a margin to buy a couple shares. It will be paid back in a couple days, but I got to take advantage of the hopefully temporary dip.