I think the main thing to remember with this approach is to cut losers fast.
Went digging for an old post from one of my favorite posters. @3500 said it best - gotta cut losers fast with an approach like this. Given WW1 was referring to XTL (top 20 stocks of the ASX) - highly unlikely any of those would go bankrupt imo without some very clear warning sign that would provide ample opportunity to stop out before the margin call comes.
"Some midnight rambling...Margin loan.
Like any leveraged product , great in good hand...Disastrous in reckless hands.
Discovered that my effort in the market can return >10% yearly in capital gains (some gurus can make 500% plus).....Dividends is the icing on the cake.
Here is how it works for me.
# I don't pay interest out of my own cash....Interest is capitalized into the loan & added on every month.
# Interest is tax deductible ....Capital gain/loss is settled the usual way.
# I don't take cash out....but I get the dividend.
# I don't aim to make a profit....My only concern is to consistently increase my equity....More like a self sustained & growing animal farm....The only way to grow it is through keeping the healthy animals & weeding the runts.
# Great for long term uptrending names & also works wonders for ST/swing trades.
# No place for complacency...Anytime the PF is in the buffer zone , the culprit animal that pushed it there is slaughtered.....A good tool to enforce discipline & in turn improve the performance of other portfolios.....It forces me to be in harmony with the market...No contrarian nonsense....No hero attitude.
# By doing the right thing , my equity grows & my borrowing power increases ....A virtuous circle.
# Over the last decade , my equity in the start up little farm has grown several fold with no funding on my part....Zero cash out of my pocket....An autonomous vehicle that only needs some maintenance.
# Never had a margin call.
This is my only leveraged play...Don't do CFDs...Don't play the short game...And never hedged my bets."
(20min delay)