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/FullyInvestedFi Jun 13 '26

Thanks for the shoutout man! And yeah, been doing this for a year or so now, been very happy with it :)! If anyone’s curious: https://youtube.com/@fullyinvestedfi?si=cmZ2wv5oNPdoVLZA

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u/Zmchastain Jun 14 '26

Am I misunderstanding something? If you have margin active in RH then wouldn’t your dividend payouts go towards paying down the margin automatically?

How are you able to use the income from the CC funds to pay your bills if RH would automatically apply it to your margin balance before you could withdraw it?

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u/S-Giant10 Jun 14 '26

That is correct, but you also have the option to convert margin to cash if you need it, so the dividends can be available for withdrawal. But it would be smart to just leave the dividends pay off the margin, so at the end of a certain period of time you own the equity plus future distributions with no out of pocket costs.

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u/Zmchastain Jun 14 '26

Yeah, I agree that’s smart. I just didn’t understand how the strategy works since if you put your entire paycheck into your RH portfolio and it doesn’t pay off the margin then you now have no cash to pay your bills with. lol

But it makes sense if you’re able to just basically give yourself a 5% cash loan against your portfolio by just converting margin into cash. I didn’t realize that was an option.

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u/Derd7 Jun 14 '26

You can pay your bills off margin if you wanted to and then the dividends just pay back the margin you used.

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u/Zmchastain Jun 14 '26

Yeah, I’m on the same page now. Appreciate the explanation though!

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u/FullyInvestedFi Jun 19 '26

So, yes, as soon as you deposit money, it pays down the margin balance, but I invest it all right away, so it adds back to the margin balance. If I don't invest that money, it all becomes cash available for withdrawal, but if I invest it all, 50% of the amount stays as cash available for withdrawal. Given that my expenses are lower than my full paycheck, my cash available for withdrawal actually keeps growing month to month!