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!
Tap into our mining investment resources to make sure you’re looking at all factors when investing in mining stocks
Mining stocks can generally be broken up into two categories, majors and juniors. Majors are typically mining companies that have been in the mining business for many… Read More
The shortages of computer semiconductors during the COVID-19 pandemic slowed the production of a wide variety of products, from computers to cars. It also highlighted the importance of those computer chips to the modern global economy.
The shortage, in fact, prompted the U.S. Congress to pass… Read More
Stanley Black & Decker is executing a comprehensive transformation that has already delivered $1.4 billion in pre-tax run-rate savings while targeting an additional $2 billion in cost reductions by 2025. The company’s operational improvements are driving margin expansion, with adjusted gross margins expected to exceed… Read More
INTEL CORP., $20.92, Nasdaq symbol INTC, is now a hold.
The stock fell 15% this week after the computer chip maker announced that Pat Gelsinger has retired as its chief executive officer and as a director.
Chief financial officer David Zinsner and Michelle Johnston Holthaus, general manager… Read More
A Member of Pat McKeough’s Inner Circle recently asked for his advice on a company that specializes in architectural metal work – ADF Group.
Pat likes the company’s healthy backlog, margin expansion, low debt, and diversified capabilities. However, he notes that the company’s client list is… Read More
Campbell Soup Co’s portfolio of well-recognized food brands provides a diversified and resilient revenue base. These household names have demonstrated enduring consumer appeal, offering stability and growth potential even in challenging economic environments.
Meanwhile, ongoing cost optimization efforts include the realization of $950 million in annual… Read More
K-BRO LINEN INC., $36.96, symbol KBL on Toronto, is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro operates across Canada and the U.K. and provides a range of linen services to healthcare institutions, hotels and other commercial accounts that… Read More
WALMART INC., $90.44, New York symbol WMT, is a buy.
The company is the world’s biggest retailer, with over 10,660 outlets in 19 countries.
Walmart continues to benefit as inflation draws more shoppers to its value-focused stores, particularly for groceries and health products. It’s also profiting from… Read More
As you’re no doubt familiar, as part of our three-pronged approach to investing, we recommend investors avoid companies in the media limelight. (The other two parts are diversifying your holdings across the five main economic sectors, and sticking to well-established companies).
A great example of an… Read More
In July 2016, Danaher Corp. (New York symbol DHR) combined its Test & Measurement business with its Industrial Technologies operations to create Fortive. It then spun off the firm, and investors received one Fortive share for every two Danaher shares they held.
In October 2020, Fortive… Read More
Learn everything you need to know in 'Juniors to Giants: The Complete Guide to Mining Stocks' FREE Special Report from The Successful Investor.
Best Canadian Mining Stocks TSX:
Plus Gold Stocks, Canadian Diamond Mines and more.
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