If you had a $100,000 Portfolio would you use margin? Probably not… because others have told you how stupid and dangerous going into debt is…
If you had a $1,000,000 Portfolio would you use margin? Probably not… because you are afraid of losing everything you built up…
The poor they like to use “bad” debt like credit card… they spend beyond their means, get into debt that they cannot repay off and become slave of the bank… I personally do not use a Credit card.. the only card for payment in my wallet is a POSB Debit card. I used to work in the bank and research has shown that people who use a Credit card tends to spend more… as much as 50% to 100% higher in expenses compared to someone who only uses a Debit card…
The Debit card feels more painful because money is taken away from your account immediately, while the Credit card feels a lot like free money… that’s until you get your bill haha… but if you have a very high level of discipline then its okay to use a Credit card for all the added benefits from the bank… 1 out of 10 folks will eventually miss their payment and pay fees to the banks, that’s why they can afford to give you so much incentives.. as long as you are totally confident to never make any mistakes then its okay… but for me.. I just totally avoid using credit card.. I also don’t spend much.. my monthly expenses is just around 1.5k nowadays.
So credit card debt is bad debt that the poor use… this is the kinda debt that we want to avoid as it can eat us alive… but on the flip side there is also good debt! Good Debt? Am I talking rubbish??? Yes debt can be a good thing if u can borrow cheaply at a low rate and invest to get a higher return.. this is called a carry trade
In fact a lot of rich folks like Elon Musk, Jeff Bezos and Jack Ma they all use margin by pledging their shares with the bank…they understand the power of leverage, how to borrow cheaply and use debt to their advantage!
Steve Jobs, Elon Musk, Mark Zuckberg they are all just paid a salary of $1! Why? because their income is taxed… they dun want to be taxed… so their real income is mainly from the appreciation of their stock holdings.. but if they sell their stocks to take profits they would also get taxed.. so to avoid taxes they never sell their shares (unless the shares are super overvalued but instead pledge their shares with the banks to borrow out cash on margin to pay for their living expenses