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Shoot, that's brutal, HA. Here's hoping 2010 is a better year for all of us. I'm hoping the smell I'm detecting is opportunity , but am bearing in mind that it may be Armageddon.We took a big hit with the loss amounting to over $3mil this was all share related.
There is not right and wrong answer, both you and Evan are correct.
The difference is that your strategy reduces the risk but doesnt eliminate it.
I also use margin lending, but i dont leave it during the course of a cycle. As the cycle progresses i reduce the % exposure.
I also use it in the same way as with property investing. It must produce cashflow not just capital appreciation (although i reckonise that it has higher risk being marked to market every day).
I was at a christmas party last Saturday night, talking to a guy who asked is $20k capital enough to live on in the stockmarket. Like, do it full time. OMG!!
The reason people margin loan is to increase their return. It goes without saying that this increases risk.
To a point where its unnecessary. If you're happy with less return, don't margin loan.
I'm not quite sure what your second paragraph means, though. How much risk to take is clearly a decision for the individual to make.
Thanks all for your honest replies.
Perhaps I do I don't know anybody who lost $$ with storm and none of my immediate friends are close to retirementOriginally Posted by Sunfish
If you don't know anyone who has had to delay retirement or, worse still, were using Storm to finance their retirement, get out a bit.
What i meant is that if you have $100k in the market and receiving for eg 30% return. Then be happy with $30k pa.
But if you want more and take a margin loan to give you $200k in the market and $60k pa be prepared for the inevitable risk and eventual margin calls.
The more money you have in the market, the less risk you need to take. And the more money you have in there the less need you have for margin loans.
Unless you (not meaning you specifically ) are greedy. In that case will eventually be burnt.
Evand - I think I understand your view now, but clearly we differ in what constitutes 'acceptable risk'.
hi
two thing put on weight
worry people eat lots of cocolate and beer as its a case of well it doesn't matter till tomorrow.
depression
well im going anyway might as well enjoy it while I have it
first thing you need to watch with either of the above is a drastic change in a person behavior
gfc is not the issue a word with a few more letters maybe
casino's
To me there is no difference paying $20k on a margin call and losing $20k on the stock.
And you're also paying interest on the $20k in the offset account. To me, not a good wealth strategy. But as you say we're all different. Good luck mate.
Fair enough, but by staying in I've ridden the correction back up again, and to a point where I'm ahead of when I bought in 18 months ago. Servicing a margin call allows me that flexibility. I also get to have my $20k BACK when the market corrects back up.
Sure, I'm paying some interest for the money that isn't in the offset account for a few months, but that difference is tax deductible against my (fairly high) income, and allows me to hold on to the larger dividends I wouldn't have gotten if I sold down (plus the franking credits).
I agree that it's riskier than having shares directly, but I still believe that with proper risk management, it's a great way to generate wealth.