How To Really Ruin Your Financial Life and Portfolio

Chapter 13Go on Margin for Everything

While we’re at it, why stop at margin for commodities? Why not go on margin for everything you buy in the way of investments? That greatly adds to your chances to make money on those stocks you are so great at picking.

If you buy 100 shares of a new, inventively named social media site for $15 each and the price goes up to $25, you make a measly $1,000. But if you buy 150 shares by borrowing against those shares and using margin, you are far, far ahead of the game. You might not have to put up any more cash (that would depend upon the margin requirements at the moment). And then if it goes up to $25, you make $1500.

Just think if you buy 15,000 shares on margin! Then, when it goes up, you are really rockin’ and rollin’.

Of course, if it goes down such that your securities are inadequate collateral, you will be asked for immediate cash—or else you will be brusquely informed that you have been “sold out” of your position. That means your whole position is sold out so the broker can seize enough cash to pay off the loan. If the stock has gone down a lot, and you get sold out but the proceeds of the sale are not enough to cover the loan, you owe the difference as a personal debt of honor.

It has to be paid. There is no way around it. It isn’t like a mortgage, where the lender’s only recourse is (usually) to seize the house securing the loan. No, no, no.

In a forced margin sale, you are liable for every single penny you borrowed whether your ...