Totally agreed..
It is playing with bombs and explosive..

If you want to have RM50,000 in your margin trading account, at least need around 25k asset with them (I refer to PB Bank).. In cash, fixed deposit, current shares holdings and others..

Let me try my attempt in your question

I use example of rm 100k cash invested in blue chip A bhd of rm 1.00 per share at the time invested. (Based on No brokerage and stamp duty and clearing fee)

Initial investment = 1000 lots @ rm 1, hence rm 100k capital fully utilize.

Usually blue chip margin of finance will be 90% to 100%, for this case, i take 100%.

So all 1000 lots of A bhd pledge into share margin account as a collateral. Market value of 100k, margin of 100%, hence your share margin facilites will have 100k credit facilities chargeable at 4% per annum when utlized.

Assume u also utilize all 100k from margin at the same stock A bhd, that will be another 1000 lots.

Case 1.
Dividend 5% from par value of rm1.00 per annum (net amount for easy calculation)
Straight forward case
1000 lot that you held, u get 5%
1000 lot that you used margin facilities at 4% per annum, hence net 1%

So your 100k is giving you 6% when u use margin, rather than just 5% is you do not use margin


Case 2.
3 fold after 5 years

1000 lot you held using your own cash become rm 3, means 300k
1000 lot in margin also become 300k.

So your 100k invested, when fully sold will get 600k.
So that is 600%

But i didnt factor i the 4% for margin financing.

If u pump in 100k into share margin account, the 100k cash is yours.
and with that 100k cash, your margin limit for the time being will be 200k (based on cash collateral x 2).
So 100k is urs, and anything above 100k, will be chargeable with 4% interest p.a.

If you had used 100k cash of yours purchasing some shitty counter that margin recognize 30% only..

that means 100k is used up for that particular share purchase, and automatically act as collateral. but due to recognized margin only 30%, so you will be left with 30k instead of 100k from the cash collateral. So your margin account will suddenly change from 200k to 30k left. (After you used your own 100k to purchase the shitty counter)

You must understand the nature of instrument

100k = cash

after purchase using 100k

the cash change it's form to "share", and the share have a value that float up and down, depending on market forces.

Btw.. something to take note on margin financing with shares as collateral.

Collateral via cash and shares are different.
Cash is the best steady collateral that will not fluctuate in value (for local market)

Share as collateral is a bit tricky. The "recognized value" is determined by market price x marginable value.

One of the risky part of margin is a change of fundamental in your collateralized share.

Normally, public thinking is that margin call is from the drop of share prices.

Another factor on margin call is the changr of marginable value due to a change of fundamental.

For example, 100k use to purchase rm1.00 stock with 100% margin value, then your margin pocket have another extra rm 100k

But if the margin value change to 50%, your margin pocket will sudden become 50k. And you will have to fork out rm 50k to top up that sudden difference.

Just a note from my piece of 2 cent experience

From my experience, no warning in margin value changes.. so sendiri zap sang