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!
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
YUM! BRANDS INC., $136.79, New York symbol YUM, is a buy for aggressive investors.
The company operates over 59,000 restaurants in more than 155 countries. Its main banners are KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). Franchisees now operate 98% of outlets.
Yum opened… Read More
The best mining investment picks are well-financed or have a partnership with a major that will help them keep developing. That’s just one of our key tips.
Mining is inherently a politically vulnerable business; you can’t move the mine to another country to escape political trends… Read More
PHILIPS ELECTRONICS N.V. ADRs $26 is a hold. The company (New York symbol PHG; Conservative Growth Portfolio, Manufacturing sector; ADRs outstanding: 906.3 million; Market cap: $23.6 billion; Price-to-sales ratio: 2.4; Dividend suspended in 2024; TSINetwork Rating: Average; www.philips.com) has finalized the terms of an agreement with the U.S…. Read More
IBM has a long history of transforming itself in response to rapid changes in computer technology. In the past few years, it has shifted it focus to its cloud operations, which let users go online to access data files and computer applications stored on remote… Read More
Investing in stock market futures for tomorrow can turn a modest stake into a fortune, but the odds favour the professionals and in reality you are likely to suffer big losses
When you buy or sell a futures contract, you commit yourself to buy or sell… Read More
BCE INC., $45.18, Toronto symbol BCE, is still your #1 Income Buy for 2024.
The company is Canada’s largest traditional telephone service provider. It has 1.98 million residential customers in Ontario, Quebec, Manitoba and the Atlantic provinces. It also has 4.50 million high-speed Internet users and… Read More
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
Politicians and consumer activists continue to accuse Canada’s big grocery chains of price gouging in the wake of the pandemic lockdowns. However, their profit margins are comparable to pre-pandemic levels.
LOBLAW COMPANIES LTD. $157 is a buy. Canada’s largest food retailer (Toronto symbol L; Conservative Growth Portfolio, Consumer… Read More
Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' FREE Special Report from The Successful Investor.
How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
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