Conference nyoss1::market_investing

    Ed,
    
    	I'm not sure who is trying to get you to do this?  In my humble
    opinion, I would never advise my clients to "borrow" to purchase mutual
    funds.  Mutual fund investments are, for the most part, a piece of a
    LONG RANGE plan.  Purchasing on margin is part of a Daily IN & Out
    Plan.  (Besides, margin buyers are looking for quick, large swings. 
    And, most mutual funds are diversified to prevent that!)
    
    			Jeff
    
    	

    re: .0
    
    I agree with .1.  Fidelity is going to hit you for 8% or so on the
    margin loan.  Any fund you buy needs a better than 8% return for you to
    make a profit.  That's a pretty hefty disadvantage to work against!

    With the 8% interest rate hit, I thought that I would have to be
    extremely optimistic (15% + anticipated return in a year) on a given fund 
    to use this method. I read about this technique in a book (Charles J. 
    Givens) and I questioned the reality of the economics of the example 
    given in the book (the book used  a example return of 28% with a margin 
    interest rate of 10%).  

    re: .3
    
    Try thinking about it this way:
    
    You have a mutual fund which you expect a 15% return from.  Based on
    your expectation you are willing to accept the risk that this
    particular fund comes with.
    
    If you buy the fund on margin, paying 8%, you are now expecting a 7%
    yield.  Does this 7% expected rate of return still justify the risk
    associated with the fund?
    
    

    On top of that, they most likely will charge you a commission. And
    market is already topping out. Not worth it! 

    I agree with .1's point :-) that you would buy funds on margin only
    when looking for fairly quick moves to the upside.  If you can catch
    even part of a good move with margin, say 5% in 3 weeks, then the 8%
    (_annual_) margin interest plus commissions are noise level.
    
    But that assumes you are doing some sort of market timing as opposed
    to buy and hold.  Last year the broad market rose 4�% or so, meaning
    margin fund buy-and-hold-ers lost money while non-margin buy-n-holders
    managed a tiny profit.
    
      John

      Buying  on  margin amounts to taking a greater risk in the hope of
      reaping a greater return.  If you believe that a fund is going  to
      move in a big way, then the risks/rewards of a margin purchase are
      no different than for a similarly margined purchase of stocks.
      
      I   do  agree  that  the  opportunities  for  profitable  margined
      purchases is lower in funds than in stocks, for  the  reason  that
      funds  in general tend to have greater price stability.  But there
      certainly are such opportunities.
      
      BTW,  I  beleive  that  you  need to put up ~50% cash for a margin
      purchase.  Right?  So if the margin rate is  8%  on  50%  of  your
      purchase it only costs you 4% of the entire purchase. Not quite as
      bad as some of the previous replies seemed  to  indicate,  but  it
      still requires a substantially above average fund to be a winner.
      
      Also, don't forget about margin calls!  When the funds price drops
      below what you paid for it you'll have to either sell at a loss or
      come  up  with additional cash to cover.  (Note the use of "when",
      not "if".)
      
      And  keep  in mind that margined purchases increase both gains and
      losses.

    thanks for the input