LogFAQs > #951026602

Er, if you start with 10% margin and don't re-up the margin as your stocks go up then it's fairly safe because you are fairly unlikely to start off by hitting a catastrophic event. But the problem is, if it's a good idea to use 10% margin in 2021, surely it is still a good idea in 2022 and 23 and 24 and so on......so you would just keep using your profits to borrow more margin. Until you eventually will hit a crash, and then it's a question of whether your accumulated extra gains over the years are enough to offset the extra loss from the crash.

I mean, I guess you could make these decisions based on portfolio size and years left to retirement - while you're young, you can take on more risk because you have plenty of future work income as a backstop. When you're old and have a lot of assets, don't use margin because it could (even if unlikely) literally be the difference between retiring with multiple vacation homes and boats and living paycheck to paycheck on social security. And I can't imagine an extra boat or 2 is worth that risk.

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September 1, 2003; November 4, 2007; September 2, 2013
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