A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi Clive, Re: Leveraged funds vs occasional margin buying..............

I can see where the higher expense of leveraged funds might still be less than occasional borrowing of $$$ on margin.

My thought had been if we were SPY investors, for instance, then if we ran out of cash in late 2008, just keep buying AIM's designated amount but borrow on margin to do so. AIM would then direct the liquidation of shares during the recovery period which then would pay down the margin expense over time. My guess is that if one had done so in the 2008-09 Panic the margin account would have been cleared of debt by around the end of 2009. AIM would have made ~20% to ~30% or a bit more on the settling of the margin account which might have been charging 6% to 8% per year for the use of the money. One's net gain on the margined shares would be affected by the additional costs, but overall return would have been healthy.

One way would be a trickle of additional expense over the long haul and the other would be a stream of more expense for a short time. We'd need a bean counter to decide who won!