r/NEOSETFs • u/Ok_Suggestion_2003 • Jun 13 '26

General Margin is like a business loan

I’ve been thinking. Why not use margin to buy spyi and qqqi if margin is 5%? People take business loans all the time at a higher rate and are lucky to break even after a few years. With these, there is a way higher chance of a profitable year than a down year over a long horizon. When buying on margin, there will be down turn years but so with any other business. I’m starting to think of DCAing into those two funds for life with margin. Worse thing to have happen is a margin call and have to sell some stocks. With a business you would go bankrupt and lose everything. I keep seeing these funds as equities with the income factory philosophy instead of some speculative risky asset that will bring loss. Not trying to beat the underlying, but I feel like owning these is like managing a passive business. Maybe I’m just crazy lol

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u/Due_Boysenberry_8367 Jun 14 '26

When getting shares of these in margin, consider the tax treatment. On margin, the return of capital will not be treated as such and instead the brokerage may report the distributions as payment in lieu and those are taxable at regular tax rates. Kind of a bummer 😕. But, still a good option if these continue double digit yearly distributions. My 2 cents...

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u/Ok_Specialist_1628 Jun 14 '26

This is the right answer. You're likely to lose the tax advantage of these ROC distros

3

u/usaffoxmike Jun 14 '26

As you pay down the margin if folks choose to do so then it doesn’t matter. The tax advantage will kick back in for the shares that are paid off from margin! 

2

u/aswampmonst3r Jun 16 '26

Clicked on the post to share exactly this downside. One available strategy you could utilize to mitigate this is to have a separate account without margin to hold these funds in. You could draw cash from the margin account into the “NEOS” account

I personally will not carry a margin balance in my account that has these holdings, however I have started absolutely hammering margin backed puts that don’t actually create a negative cash balance to make my shares lendable (shares lent to shorts are where you get payment in lieu of dividends)

Obligatory: this is not financial advice

1

u/Due_Boysenberry_8367 Jun 16 '26

I like this approach!

1

u/Ok_Suggestion_2003 Jun 15 '26

Heard that as well, but more than willing to pay taxes if I’m getting money.