Well, that post may have been a fake, but this one isn't. I am a margin investor, pure and simple. I've had my knuckles whacked, but I'm not stupid. Margin is, in my view, just like a table saw...it's a tool damnit, just a tool. You either read the safety instructions that came with it, or you're a fool. It can be used well, or badly. It can hurt you or help you.
Now, if I had enough money to set aside for three years' income, maybe I would think differently about it, but I don't. I also have no income other than Social Security, so I count on the growth in my trading account to make up the difference between what the Feds send me and what I spend. I am rather conservative, have relatively little need to spend, so a modest monthly increase is just fine.
But, yeah, I'm greedy. So margin works for me because I understand the implications. During the most recent angst, I held too long...much too long. Normally I don't do that, but this time I did, to my considerable sorrow. But, I have to say that when I did sell, it was because of a line in the sand across which I would not go. That meant I preserved a five-month double plus. Not too shabby...I sat while the market plunged on Thursday and Friday, and had cash ready for Monday.
I'm back on margin, and back to roughly a 3x in under six months. Took me two days to do the third bagger. I work at this guys and gals, it's my job!
Perhaps I'm the exception margin user. I've a tolerance for it, accept the risks, and for me, it has worked. There was a time, long ago, when it didn't, and it cost me as dearly as that perhaps fake poster experienced. It didn't wipe me out because I wouldn't let it. Margin is not my enemy, but it might be yours. I do have one significant advantage, I can watch this stuff full time, many cannot, or will not.
My margin use varies a great deal. Some times I'm in 100%, sometimes much, much less. Presently, I'm about one third, and considering going for more. Yes, I do have core holdings that no matter what I will not sell, and yes I do deal only with the stocks we here work with...plus an occasional shiny pebble.
Tekboy, I take some exception to your FAQ suggestion about margins, because for me, it really doesn't apply. Reckless use of margin...yes, you're right. But that's not how I play them. Stop limits do apply, as I was most recently reminded.
My dad, believe this or not, never made a nickel on real estate. In fact, he lost more than I wish to remember. And guess what, he was margined (mortgaged) to the hilt each time. His timing was lousy. Mine has been this time, but I had that line that I would not cross. Margin got me where I was, and margin will get me back there.
Some of you know me (casually) and you know I'm not some sort of raving madman. Like that table saw, I use margin as a tool. It can hurt you, or it can speed the work.
Chaz |
