Hi! Has anyone tried out margin financing for a leveraged portfolio and what do u think of it? Is it worth trying?

I wouldn't suggest a beginner to do it, unless you have money set aside if you get margin called, or if you know how to set stop losses.

I had tried it out personally and it is not worth the risk. Margins can cause someone to become more greedy. Once you are greedy, this kills you.

Another thing is the interest on the borrowing is too high. Not worth it.

Leveraging is a dangerous play in investing, bankruptcy happens when someone over leverage and do not have the money to pay the interest!

If you are just starting out, or do not have much experience in the stock market, best to stick with investing with money that you have.

Using margin financing is basically borrowing money to invest. This creates pressure if market goes against you. Most people tend to over-leverage aka borrow too much money if they are not careful. And when margin calls occur, you have to be prepared to top up more cash to carry on holding the losing positions or have your positions forcefully sold away at lousy prices.

Only do so if you are very disciplined, knows how the margin acc works(you would be surprised that many do not even know the internal workings of the margin acc) and can manage your own risk. I have seen too many cases of margin financing gone wrong.

A peace of mind is priceless. Better to invest with money you have.

Hi anon,

You need to be mentally prepared to lose more than your invested capital.

If you are able to withstand such a loss, then margin can be a very good way of increasing your returns. It's a double edged sword.

You need to select what you invest in wisely, and have an exit plan if things go wrong.

Try to look for safer alternatives that allow you to just edge out the interest you are paying on your borrowings. There's no need to seek 10x the returns on margin unless you are really a risk taker. If you can make 4%-5% normally, then getting 7%-9% with margin is already putting you ahead. Take care of your downside first before going for the upside.

I've seen a margin call of US$60K before, so I hope that gives you an idea of what can happen if things go wrong. It was on a US stock that went the wrong way.