Tag: margin

What is margin?

Margin is a term used to refer to money borrowed from a broker or dealer to purchase securities. The purchase of shares in such a fashion is known as buying on margin.

The main cost involved with this investment strategy is interest on the money you borrow. And of course, when you sell a security that you’ve bought on margin, you must first pay back the loan from your broker.

The main risk of buying stocks on margin is that it increases your leverage. Leverage works two ways: It magnifies your profits when the market moves in your favour, but it magnifies your losses just as effectively when the market moves against you. That’s because the amount you owe on your investment loan stays the same, so every dollar your portfolio loses comes out of your equity.

Margin buying can help you cut your tax bill. That’s because you’ll be able to write off your margin interest in full against ordinary income in the current year. At the same time, you’ll pay less than ordinary income-tax rates on dividends from Canadian stocks. If you buy qualified Canadian stocks, you’ll pay taxes on dividends you receive at a rate that is well below the rate you pay on ordinary income. This tax break alone—getting a full deduction on your interest costs, and paying a lower tax rate on dividend income—adds appeal to margin investing.

All in all, we feel you should focus your efforts on long-term investing and building a well-balanced portfolio—and to do that, follow TSI Network and use our three-part Successful Investor strategy:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight

The key to finding the “hidden gems” in penny stocks is to understand and avoid the risks that go with them. You get the benefit of Pat McKeough’s decades of experience—and his specific recommendations—in our special report, TSX Penny Stocks: Hot Canadian Penny Stocks and How to Invest in Penny Stocks in Canada, on TSI Network. Claim your FREE copy right now!

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Hold these two spinoffs for now

November 16, 2023||Spinoffs

On October 16, 2023, the old NCR Corp. (New York symbol NCR) completed its plan to split itself into two separate firms. One (called NCR Atleos) will focus on ATMs, and the other (called NCR Voyix) will focus on digital commerce businesses.
Investors received one share… Read More

We prefer food sellers over food producers

October 13, 2023||Value Stocks

Under pressure from the federal government, Canada’s leading grocery chains have agreed to a series of measures to lower prices for consumers. Those include discounts, price-matching campaigns, and price freezes. The government is also looking at ways to get food producers to lower their prices.
We… Read More

Q: Pat: I wanted to seek your opinion on buying Celestica. It keeps rising, so I’m not sure if the wind may soon go out of its sails. Thanks.

October 11, 2023||How To Invest

A: Celestica Inc., $36.34, symbol CLS on Toronto (Shares outstanding: 112.5 million; Market cap: $4.2 billion; www.celestica.com), is a contract manufacturer that makes various electronic devices on behalf of other companies.

Celestica has two operating segments: Advanced Technology Solutions (41% of revenue) and Connectivity & Cloud… Read More

Three ways to tap a construction boom

September 28, 2023||Growth Stocks

The re-opening of the world’s economy in the wake of the COVID-19 lockdown spurred strong demand for building construction services and infrastructure projects. Here are three high-quality stocks to help you benefit from it.
CARRIER GLOBAL CORP. $55 is a buy. The company (New York symbol CARR; Conservative… Read More