|
Much is made, correctly so, about the dangers of investing using margin, borrowing against one's equity to purchase additional shares of stock. Yet if margin buying is kept at a modest level, it can enhance returns without undue risk to one's portfolio. Suppose one can average 12% a year price appreciation from good stock selections and then add to this source of nest egg growth a 3% per year margin investment.* This result will not occur every year, and one ought never expect it to do so, yet over the long haul it means there could be a total of 15% annual increases in one's holdings. They can thus double about every five years: just $10,000 in stock purchases by a young man or woman in 2017, if left fully invested, can become $100,000 by about 2033, $1,000,000 by roughly 2049. If one can add other investments along the way, so much the better.
When one wishes to invest this way, assets such as those noted above might be good ones from which to choose next year. As always, it is best to do our own research and/or check with trusted monetary consultants before embarking on any new financial plan.
[*In practice, to achieve a net margin-based increase in investments of 3% a year, extra investing will be required to offset the costs of interest on the debt. Thus, depending on the margin rate, a person could for example average a 5% use of margin for net gains in the portfolio of 3% a year.]
| |
