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No. of Recommendations: 2
[responding at invitation]

The biggest problem (read: risk) with leverage is that you can get a margin call at any time. ANY TIME, not just if you hit the Reg T limits. Read the disclosures----your broker can give you a margin call at their whim.

(This is why people who say "investing in the market while you have a house mortgage is just like buying your house on margin--and everybody knows how risky margin is." are just plain ignorant. Your house mortgage can't get called. </editorial comment> )

I actually like the stance that IB takes. They don't issue margin calls. They just immediately sell you out. In real time.

If you are going to use margin, stay safe. Don't go more than maybe 15%-20% initial margin, not the 50% that Reg T allows.
Be very clear in your mind that with margin at most brokers you are dragging a huge anchor. Typically margin rates are around 8%. That essentially means the the first 8% of your gain goes straight to the broker. Stock goes up 10%---you get 2%, broker gets 8%. Worse yet, suppose the stock goes down 10%. You lose 10% on the stock PLUS you pay another 8% to the broker.

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FWIW, I don't particularly like the rule-of-thumb that says your bond allocation should increase each year. And we are retired.
Instead, I use the 5 asset class mix, where each class is 20% of your portfolio. The "fixed income" class is what people thing of as bonds. We don't have any bonds (except incidently). Most of our fixed income class is in preferred stocks and other steady dividend-paying stocks. But mostly preferreds. 'course, preferreds are essentially bonds that trade like a stock.
We have a nominal position in bonds in the form of BND. That's a small but fixed percentage of our 20% income-asset-class.

My broker for BND is Interactive Brokers, mainly because I can take advantage of their low 1.65% margin rate and juice up my returns in BND. That won't last forever. When the rate differetial disappears I will sell enough BND to zero out the margin balance.

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The best (read: worst) margin story I heard was during the dot-com boom & bust.
This lady had been trading using maximum margin and made a fortune (over $1 million) all short-term capital gains. End of tax year, so she owed something like $300,000 in Federal income tax. Between Jan1 and April 15 the marker went down, she got matgin calls, and lost all of the profits she'd made plus she got sold out due to the margin calls and locked in her losses.
But the IRS says, If you make $1M in one year and lose $1M the next year, too bad. You owe taxes on the $1M and must pay by April 15th.
So she owed $300K but had lost all her money, so she couldn't pay the IRS.
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