Topic: How To Invest

I am retired and live off the distributions and dividends from my portfolio. What do you think of using a small amount of margin to buy some more dividend paying stocks? The yield on some pipelines and banks is higher than the interest rate on the margin loan. (I am thinking of, say, using just 20% of margin available.)

Article Excerpt

If you could buy on margin when the market hits bottom, stay margined as the market rises, and sell out at the peak, you could very quickly acquire a measurable proportion of all the money in the world. Nobody ever succeeds in that, of course. This gives you an indication of the difficulty of spotting and profiting from market tops and bottoms, with or without the use of margin. My view is that if you are going to use margin borrowing to invest, it’s all the more important to follow our three key investing rules: invest mainly in well-established companies; spread your money out across the five main economic sectors; and avoid stocks that are in the broker/media limelight. If you religiously follow that advice and expand your portfolio using margin, you are going to make money over long periods — and you will gain tax benefits. You’ll be able to write off your margin interest in full against ordinary income…