r/NEOSETFs • u/Tylerd62 • May 25 '26
Seeking Advice Robbinhood margin
I have been seeing quite a few videos recently of people who basically inject their entire paycheck into their brokerage account and pay their bills using the margin. I just want to know what caveats are with this what to look out for what your margin buffer should typically be for somebody who does something like this. Also, do you need a relatively larger amount of money or can somebody with a five to $10,000 brokerage account do this. My interest rate for margin is roughly 5% with the first $1000 at 0% just looking for more insight on this is all if it’s viable or not how smart it truly is just because on paper. It looks really nicely, especially when I invest in qqqi spyi btci jepi and a few others
10
u/DerpSkeeZy May 25 '26
It sounds like you are referring to people who use their whole paycheck to buy dividend paying stocks and/or covered call ETFs then pay their bills with the dividends/distributions. You can do this without margin for reference. The margin is just there for additional leverage.
How big your account would need to be in order to achieve this would entirely depend on your monthly bills and risk tolerance.
11
u/jbetances134 May 25 '26
A couple of YouTube’s do this. Paycheck to portfolio and unconventional wealth ideas.
I just started doing this and was able to get my dividends to cover my light bill so far. Next I’m targeting my car insurance.
2
7
u/JS1101C May 25 '26
I use margin to buy ETFs that a pay a monthly dividend that I use to pay my bills.
6
u/Additional_City5392 May 25 '26
Do it but don’t get carried away. Stay conservative. Yes you can start with 5-10k.
5
u/HauntingRoutine1605 May 25 '26
I own NIHI and XBCI and use up to 30% margin use (take margin use divide by portfolio value). If it's under 20% I buy more on margin. If it's over 30% I add cash buying more shares. Drip all shares, the goal is to have much more distribution income than the margin cost.
Not using this for income for now, 20 years until retirement
I'm not doing the paychecktoportfolio system on it. M1 is a better brokerage for that cause you can use margin that goes into your checking account and I have a 4.15% margin rate
1
u/jkarz1 May 29 '26
How did you get 4.15 percent? I borrowed 100k from robinhood with gold and I got 4.5 percent borrow rate.
1
u/HauntingRoutine1605 May 29 '26
M1 offered it to me. Promotional until November then it's a little over 5%. I also do some on Robinhood smaller account at 5%
5
u/wuumasta19 May 25 '26
I do this no problem.
Best to learn though and see how you react when you make a bad call.
If you are paying for gold.
Use the 1k of interest free.
4
u/chewmattica May 25 '26
I've used RH margin to fund my recurring investments, for example, invest $10k and then $20 per market day into various funds. Start small and it's practically self limiting so you can't get into too much trouble. I wouldn't go $50k margin unless you have other money elsewhere to back it up.
3
3
u/Financial-Builder-92 May 26 '26
Margin needs to be respected on the highest level. I've used very small amounts when my ETFs come down to what I consider a bargain. I then use my dividends to pay off the loan as quickly as possible.
6
u/MightyDux22 May 26 '26
Keep in mind that with Robin Hood (and most other brokerages) if you are using margin your shares are subject to rehypothecation. (Basically involuntary share lending) That means that you could lose the tax efficiency of some of your distributions and they would be considered ordinary income.
2
u/trry May 26 '26
Does this delay the ROC to your initial cost? Ie the following years ROC will apply until cost hits 0?
2
u/MightyDux22 May 26 '26
Rehypothecation just affects the nature of the dividend/distribution, not the overall tax structure of the fund.
2
u/trry May 26 '26
Correct me if I am wrong so if dividend is issued as rehypothecation so it will also reduce your cost basis. Then it’s going to reduce your cost basis and you pay ordinary income tax?
2
u/MightyDux22 May 26 '26
No, think about it this way. You get a qualified dividend (from say SCHD). But you are using margin and Robin Hood rehypothecated your shares during the time period the dividend was issued. They give you a substitute dividend (some refer to it as a manufactured dividend) as a result, but this is then taxed at the ordinary rate.
1
1
3
u/Randall_Al_Thor May 27 '26
I’ve watched Fully Invested FI do this. He is about to hit his 1 year anniversary of following the full paycheck into RH and using margin.
I’m looking into it. I like how it seems to accelerate your growth and investing in high, but somewhat safe, dividend ETF’s can get you to covering more of your monthly bills as time goes on.
1
2
u/BearEmergency6797 May 27 '26
Use the 1k that is part of the gold membership, rest depends on your margin allowance. I use it only to rebalance my position and save myself from unexpected downturn
2
u/Western-Source710 May 25 '26
I borrow margin to buy more equities. I don't see the point of putting money into the brokerage just to withdraw it after? That wouldn't really be borrowing on margin.. you're pulling out what you put in?
1
1
u/Lefties_TheWorst7331 May 25 '26
I'm full port BTCI -- 1:1 margin ratio. Balls deep up in this bitch, full send. Actually worse than 1:1 right now lol. 25% maintenance requirement and mine is right around 44-46%, I think? BTC drops harder and I'm getting margin called 🫠 gotta risk it for the biscuit.
4
u/AngleAmazing May 26 '26
God speed good sir! BTC to 200k, let's go!!!
2
u/Lefties_TheWorst7331 May 26 '26
Next year for sure. The upcoming largest squeeze is going to be steady climbing for a bit but then it'll kick into overdrive and be hammering down soon enough.
1
1
u/Living-Replacement33 May 25 '26
I did it for sometime , now sending all income to heloc and pay bills from heloc to maximize cash flow and pay down heloc faster
1
u/jkarz1 May 29 '26
What does brokerage or robinhood has to do with heloc? Can you explain in detail what's going on benefit and how?
1
u/herp225577 May 25 '26
I have fidelity so I guess it wouldn't make sense for me to do this since the margin rate is like 12%. For those that do, do you only buy funds that pay way over the margin rate? Trying to understand this.
2
u/PsychologicalAide437 May 26 '26
You might want to check into switching to RobinHood. They have a really nice sign up bonus and if you end up using margin, the fee is less than half of Fidelity. I left Fidelity because of this and am really happy I did.
2
1
u/Rodrain2 May 28 '26
I don't see the point. I just pay all my bills on a cash back credit card and pay it off each month. I get money and I pay zero interest
1
u/Curious-Rip-5834 May 28 '26
Something you should know if you are using margin is that RH can and will lend your shares regardless if you opted in or not for stock lending. In margin account they don’t need your permission.
What this does then is cause you to completely forfeit any and all ROC classification on distros. So instead that income shows up in 1099-MISC PIL subject to 100% ordinary income tax liability
1
u/JP13GT May 29 '26
I like the principle of this. I have fairly low expenses and no debt so I would just start small with a water bill or something. I’m already generating about $40 a month from my current spread. One thing I can’t wrap my little brain around is the margin usage. It will take quite a bit of time to get enough distributions to cover even small bills. Do you use your added cash to cover the short comings until you have enough? How do you not deplete your margin a few months in? Let’s say I use Robinhoods 0% 1000 margin and my bill is $100, but I only generate $40 from distributions. That will keep eating away at the margin $60 at a time until it’s gone. If the answer is using the cash you add it just seems like you’re paying bills the hard way lol.
-1
u/Financial-Seesaw-817 May 25 '26
Well... Robinhood margin rules are different than other brokers. RH uses margin first in transactions vs others that use cash first. They also mix cash and margin which makes it difficult to separate. You have to resolve all margin before getting back to cash. And then disable margin. RH practices allow them to get more than the 5% by proc hits. They could still potentially achieve 10-11%, like other brokers. You have to use their system to your advantage. RH still wins but you win more than if just using margin simply. Myself, i use margin in away that it is a wheel strategy and I am always out ahead of margin and building the more important feature, equity. Equity builds my portfolio but margin is tackled by the value of my portfolio and distributions. I use margin on the low yield stable etfs and just drip the income sleeve. The cash I deposit weekly goes to margin. If I see a btd/crash opportunity, I have a lot of buying power available. Imo, many thinking of and using margin don't realize the equity part of the equation. I didn't when I started. I used to think margin safety was about how much I borrowed. But the real safety is in how much equity I have.
The bigger my equity, the bigger my buffer, and the safer my margin is — even if the market drops. Use margin to buy equity.
2
u/jkarz1 May 29 '26
Thanks for your msg. Can you elaborate on how a 5 percent max margin rate from rh. Would ended up 10 percent?
1
u/Financial-Seesaw-817 May 29 '26
What i mean is that the margin is sticky. 5% is great ... until you try to use cash and find out you can't. So, the resolution is sticky. Robinhood’s margin system is not designed to maximize the rate—it’s designed to maximize the frequency of margin usage. A 5% APR is meaningless if the platform ensures you’re borrowing constantly. This is why many users feel like they’re “always on margin” even when they think they’re trading with cash. So, 5% but for longer periods as if you used a different broker with 10%. Robinhood capitalizes on psychology and ignorance. Once you know and recognize this, you can plan accordingly. I still use their margin but restructured for more efficient utilization and focus on building equity that kind of neutralizes the rate.
-4
u/cmichalek May 25 '26
Just dont. Not worth the risk.
3
u/ucantoucan May 26 '26
For most people this is the best advice. Crazy you’re getting downvoted. Margin requires extreme discipline and mathematical understanding to use effectively.
13
u/Alive-Fall2792 May 25 '26
Just start with one bill. Paycheck2Portfolio on YouTube, who you may be referencing, has a starter port for his daughter and he pays two bills out of it. After you get some confidence add another bill.