Lee,
As musea replied, there will be others who disagree, and I am one of them!
I was fully margined last February and after my windfall, I decided not to be b/c I didn't want to lose my gains. It wasn't until after DELL knocked some sense into me that I went on margin again (after the last earnings report).
I became fully margined on DELL even though it was meant to be a short-term play. (After all, I'm being charged about 1/2% per month).
But as DELL kept going, I realized that DELL (and many of my other stocks) can easily beat 7%/year. That's when I decided to hold on to DELL on margin even though it had reached my target price. And boy, was it a good decision!
If you run your own business, loans (for most people) are a fact of life. You borrow money and hope to make enough to pay it back + interest + profit. If you own stocks, you really do own your own business, and its your job to make it as profitable as possible. Margin is a great way of doing this. I am up over 20% this year, alot of it is due to margin!
The risks involved (margin calls) are minimal if you invest wisely. I purchased about 30k of MSFT last year on margin (my first time being so heavily in debt-about 2.5M). My interest payments amounted to roughly 15k/month so I sold after 1 month to save my profits. Had I held on to MSFT on margin, I would have an extra 2.5M (minus 175,000 in interest). Great companies like MSFT/DELL will almost never fall 30% (the standard loss before you're subjected to a margin call).
JMHO,
DK |
