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:
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!
Utility investments typically benefit from stronger economic activity, and a top Canadian utilities ETF will let you take advantage of this—if you watch for low fees and sound stock holdings
Utility stocks are shares in companies that provide electric power, telecommunications, pipeline services and so on… Read More
Like its rival Loblaw, supermarket operator Metro has delivered solid gains for our subscribers over the past several years. In fact, since we first recommended it as a buy in June 1998 at $3.54 a share (adjusted for splits), the stock is up a whopping… Read More
On November 1, 2015, the old Hewlett-Packard Co. split into two firms—HP Inc. and Hewlett-Packard Enterprise. For every share they held in the old HP, shareholders received one share in each of the new companies.
HP is now up over 150% since the split, while HP… Read More
A: TransDigm Group Inc., $1,366.53, symbol TDG on New York (Shares outstanding: 56.0 million; Market cap: $77.0 billion; www.transdigm.com) designs, produces, and supplies engineered components for use in commercial and military aircraft. Its products include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, and… Read More
VERIZON COMMUNICATIONS INC., $41.15, New York symbol VZ, is a buy.
The telecom provider is the second-largest wireless carrier in the U.S. after AT&T, with 114.2 million consumer cellphone subscribers. It also sells traditional telephone lines, high-speed Internet and TV services.
This week, the company agreed to… Read More
A main part of our approach to investing is to look for companies with hidden assets that can unlock long-term value for investors. In the case of consumer products giant Procter & Gamble, its hidden assets are its brand names, many of which have been… Read More
When investing in mining stocks, you’ll find that they can be broken down into two categories, majors and junior mining stocks. Majors, the kind we focus on for our portfolio management clients, are typically mining companies that have been in the business for many years… Read More
Following a sound risk-averse investment strategy will guide you to long-term investments in high-quality stocks.
Conservative investing is an example of a risk-averse investment strategy. Conservative investing is an investment strategy that focuses on lower-risk, predictable and stable businesses. This strategy typically involves the purchase of… Read More
Many spinoffs tend to move sideways immediately after becoming separate companies. Essentially, it takes time for them to overcome investor reticence to buy. That’s why we don’t yet recommend these two for your new buying.
HOWARD HUGHES HOLDINGS INC. $73 is a hold. The company (New York symbol… Read More
In general, spinoffs are the closest thing you can find to a sure thing. Study after study has shown that following an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years.
In many cases, we advise investors… Read More
Learn everything you need to know in 'The ETF Investor's Handbook' FREE Special Report from The Successful Investor.
ETFs Guide for Canadian Investors: Find the best way to invest in ETFs with low fees, low risk & high satisfaction.
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