Playing With The Bank’s Money Continued

When I was at Merrill Lynch there was a particular customer that only bought government bonds-this was his entire portfolio. You could offer him the best new issues etc…And he never wavered from his position. The interesting thing about this customer was the fact that he used margin to purchase his bonds. Short AnswerMargin buying can be risky with big losses or it can work for you if you use it like you are purchasing a home. For a longer discussion see this link: He would wait until interest rates were sky high then buy on margin and make a ton of money as rates decreased and bond prices increased-he did this time after time. Another customer would also use margin to buy mutual funds-he would pick a conservative growth fund that focused on dividend growth-he did not need the dividends during the time I was working with him and he was sitting on a two million dollar portfolio. This is not a wholesale endorsement for buying stock, bonds and mutual funds on margin but merely an attempt to give you food for thought!

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