09-05-2015, 11:26 PM
Great stuff. I am pretty comfortable with using between 10-20% of my portfolio in leverage. What I do is pretty straightforward- I borrow money cheap from IB, and I throw it into high yielding stock. So I am pushing the income envelope.
I guess if the Fed Funds rate gets raised aggressively (unlikely in the current "new neutral" environment), then I'd be in a tough spot. But, I could always sell assets that have appreciated nicely, like my AAPL, WBA, or VFC, and I also tend to invest new cash quarterly which pays off my margin. Of course, my dividends pay back my margin as well.
I'd be curious to hear anyone's feedback. To me it kind of seems like a no brainer. I guess if you don't really need to worry about your income for a while, you might sleep better without any margin or debt in your portfolio. But, I tend to use my dividends every once and a while (this is all in my individual account) so having a 6-7% yielding REIT or an RDS/B purchased with margin I am paying 1.64% on to IB seems like a no brainer to me, for now, at least in this low interest rate environment.
I determined with IB customer service that with up to 30% margin, you won't need to worry about a margin call in the event of a 50% market crash with a Reg-T margin account (my account is even safer, it is a "portfolio margin account").
So I'm curious what you decided to you, CrimsonGhost. EarthToDan, I tend to avoid options, but the concept of what you describe sounds very interesting indeed, and relatable (serving as an insurance company of sorts).
I guess if the Fed Funds rate gets raised aggressively (unlikely in the current "new neutral" environment), then I'd be in a tough spot. But, I could always sell assets that have appreciated nicely, like my AAPL, WBA, or VFC, and I also tend to invest new cash quarterly which pays off my margin. Of course, my dividends pay back my margin as well.
I'd be curious to hear anyone's feedback. To me it kind of seems like a no brainer. I guess if you don't really need to worry about your income for a while, you might sleep better without any margin or debt in your portfolio. But, I tend to use my dividends every once and a while (this is all in my individual account) so having a 6-7% yielding REIT or an RDS/B purchased with margin I am paying 1.64% on to IB seems like a no brainer to me, for now, at least in this low interest rate environment.
I determined with IB customer service that with up to 30% margin, you won't need to worry about a margin call in the event of a 50% market crash with a Reg-T margin account (my account is even safer, it is a "portfolio margin account").
So I'm curious what you decided to you, CrimsonGhost. EarthToDan, I tend to avoid options, but the concept of what you describe sounds very interesting indeed, and relatable (serving as an insurance company of sorts).