The use of margin has been really tempting, but I am very wary of actually using it.
Having a cash account, I can have comfort in the fact that I am owning share of a company. Even if the market prices my stock down 90%, I can have comfort knowing that I own the same amount of that company. As long as the fundamentals are strong, I will still be well off in the long term.
With margin, you are owning pieces of paper, instead of ownership of a business. If the market goes insane and lowers the price of your paper, they can take it away from you and you are left with nothing.
This adds another risk to your portfolio. Instead of just dealing with business risks, you face market risks too. With the recent drops of NVDA, I am reminded how serious these risks can be. The stock seemed safe to use margin on when it was trading under 20, but the market gave me a big surprise.
The only reason I would use margin is that I am young, and can really afford the risks of losing it all in the worst case scenario. It would certainly suck, but I could make my money back with a job if I really had to. As my portfolio increases in value in time, I could no longer afford these risks and capital preservation becomes much more important.
I am still wary using margin, and if I do decide to do it, I will use it very conservatively. I am aware of the risks, and they scare the hell out of me.
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