# How do I maximise my returns when using margin in my brokerage account?

Suppose I have an investment account with \$10,000 in it. I have a margin rate of 10% per year. For a total of \$2.7 interest per day, or \$1,000 per year.

I can invest in a high risk ETF with returns of 25% per year, or safer investments that are from 10-15% per year.

I know that if I don't use margin, my investments are a straightforward calculation. If I leverage my portfolio and use margin, then potential profit calculations become more complex.

Question

• Given a margin interest rate of X, and Y dollars on margin, what must my % return be in order to beat the straight non margined investment?

My intent is to prove that buying treasury bonds on margin is probably a bad idea, and figure out how much of my portfolio I should put into an ETF that is likely to beat 15% YOY return

This is not a homework question. The specific funds I'm looking at are EZU, IWC, SCHC, SCHX, SCHA, XLF, and XSD.

• Is this a homework question? I ask because the numbers are textbook, not reality. The word "safer"doesn't belong with the numbers 10-15%, although I suppose in comparison to 25%, it might apply. There is no ETF likely to exceed 15%. Not in US\$, anyway. Nov 22 '13 at 19:25
• No, I'm not in school.. (done with college 12 years ago). I'm just trying to wrap my head around this concept and how to not be dumb. The numbers are simplified for discussion purposes, but I can put exact numbers if needed. @JoeTaxpayer Nov 22 '13 at 19:49