A safe interest rate for buying stocks on margin seems like a slightly different situation than periodically withdrawing money for retirement. If we go by the safe withdrawal rate rule, which is 4-5% even when amortizing the portfolio, there are almost no brokers that offer acceptable margin rates (currently IB does, but it will likely get close to 4% fairly soon).
The difference is that you can let the borrowed amount continue to accrue interest while you wait for your stocks or ETFs to rise in value, perhaps even for 10 years or so. You can't go 10 years without withdrawing money from a retirement account.
It seems that if the market is expected to have about a CAGR of 7%, then it makes sense to buy on margin if the interest rate is below ~6% or around there. That's not a very mathematically rigorous analysis though. Has any research been done on "safe borrow rates"?
Submitted July 02, 2017 at 11:35AM by gnurd http://ift.tt/2ue81Ww
