How you can use margin successfully in inventory funding?

Because the outbreak of the Covid-19 epidemic in early 2020, the pattern of buyers opening securities funding accounts has elevated sharply.

Statistics from the Securities Depository Middle (VSD) present that in 2020, home buyers opened practically 394,000 new securities accounts, double the earlier yr. Not stopping, in 2021, the pattern of opening accounts continues to extend dramatically due to the assist of eKYC. Within the first 7 months of the yr, the variety of home buyers opening securities accounts reached practically 722 thousand accounts, bigger than the 2 earlier years mixed.

The truth that the market acquired numerous buyers has pushed the market liquidity to extend dramatically, and of which there’s a big contribution from the margin money stream. In investing, utilizing margin is a measure to assist buyers enhance earnings shortly when the market is favorable. At present, Pinetree is called a securities firm that’s fully freed from buying and selling charges for all times and has a Margin rate of interest of 9%/yr with out situations. That is the perfect price on the Vietnamese inventory market at present.

Nevertheless, margin can also be a double-edged sword, which might make buyers lose shortly if used on the flawed time when the market corrects. Within the article under, Pinetree Securities has summarized find out how to use margin successfully for inventory buyers.

What’s margin?

Margin buy is a purchase order of securities by an investor utilizing borrowed cash from a securities firm.

To put an order to purchase margin securities, the shopper should deposit a sure amount of cash in keeping with the ratio prescribed by the securities firm.

For instance, if an investor has 100 million dong to purchase securities, usually they will solely purchase as much as 100 million dong, but when the investor buys margin, they will purchase greater than that quantity (eg 150 million dong). ). The distinction (50 million dong) will likely be lent by securities firm. This mortgage will likely be secured by the quantity of securities ordered. If the securities fall in value inflicting the deposit quantity to be decreased to lower than a sure share of the entire worth of the securities, the securities firm would require further fee to boost the margin ratio above the preliminary margin charge. referred to as Margin name or will Drive Promote (the securities firm sells some securities to recuperate cash, guaranteeing a secure debt ratio).

Dangers of utilizing margin

At present, margin lending rates of interest of securities firms vary from 9%-14%, so if the speed of return on investor’s invested capital is just not higher than the margin mortgage rate of interest, then buyers is taken into account as a loss.

When the market goes up, many buyers are affected by the FOMO sentiment, which simply results in “full margin” or “All in” state of affairs.

The potential of being referred to as by Margin till the account is burned is rather a lot when utilizing monetary leverage to purchase shares when the market value falls, the following consequence is that there is no such thing as a cash to proceed to put money into shares at a very good value. . Even many buyers are influenced by psychological components that proceed to make ill-advised funding selections.

How you can use margin successfully

Utilizing margin is taken into account to be efficient when deducting margin curiosity bills, buyers nonetheless have earnings. There are four essential components to assist buyers use margin successfully:

Inventory choices

Buyers ought to select shares with excessive liquidity to enhance and are in an uptrend or blue-chips that lead the market.

Buyers must be taught fastidiously about companies and industries with good development to decide on shares that match the factors.

Select a time

Selecting a positive market time is crucial for profitable funding even in conditions the place no margin is used. With margin buying and selling, buyers ought to use margin at first of the wave, when the market reveals clear indicators of development, and scale back margin when the market enters the final cycle. Buyers ought to use technical evaluation to decide on the correct purchase level.

Threat administration technique

Buyers ought to have a rule to keep away from dangers. That means, buyers all the time use margin at a secure stage, with an inexpensive portfolio construction, and keep away from being affected by crowd psychology when investing. Using margin is sort of a double-edged sword: when utilizing a margin with a excessive ratio, it helps to extend earnings shortly when the inventory will increase in value, conversely within the case of a pointy decline within the inventory market, it’s tough for buyers to keep away from. from nice harm.

Accumulate funding data:

Not all buyers know find out how to use margin instruments successfully to enhance earnings, even skilled buyers want to contemplate fastidiously earlier than utilizing. Due to this fact, buyers ought to accumulate data about inventory funding to grasp the market, find out about companies to have acceptable ways.

Bao Son

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