I Took Out $75K Of Debt To Buy Stocks: Here's What Happened
Most people think debt is a trap. I used it to build a cash flow machine. Here is the math behind my $75,000 margin experiment.
We are taught from a young age that “debt is bad.”
For 99% of people, that is absolutely true. Credit card debt, high-interest auto loans, and personal loans for vacations are wealth destroyers. They rob your future self to pay for your present self. If you go dig yourself too deep in the hole, it can feel impossible to pay off the debt.
But the wealthy play by a different set of rules. They view debt not as a shackle, but as a tool.
When you use debt to buy a liability (like a luxury car), you get poorer. But when you use debt to buy an income-producing asset (like a cash-flowing dividend stock), you are essentially using the bank’s money to build your own freedom.
This is the concept of “Positive Leverage.” And I decided to put it to the test over the course of 2025.
The Concept: What is Margin Debt?
So, how does this actually work in the stock market? It’s called Margin Debt.
In plain English, margin is a secured loan from your brokerage. Just like a bank uses your house as collateral for a mortgage, your brokerage uses your stock portfolio as collateral for a margin loan.
Unlike traditional debt, such as personal loans or credit card debt, there is no payoff date for margin debt. Instead, you will get charged interest monthly until that loan is paid down.
So this strategy requires you to already have a funded stock portfolio.
Because the loan is secured by assets that can be easily liquidated (stocks), the interest rates can sometimes be lower than unsecured loans. You don’t have to fill out an application or go to a bank branch. You simply click a button, buy more stock than you have cash for, and the brokerage lends you the difference instantly.
The Strategy: The “Arbitrage” Game
Why would anyone take on this risk? It comes down to one simple calculation: Arbitrage.
Financial arbitrage is the art of profiting from the spread between two rates.
Cost of Debt: My brokerage charges me roughly 7.5% interest to borrow money.
Yield on Asset: I can buy a basket of high-yield Income ETFs that pay me 12.5%.
The Spread: different between the cost of debt and the yield (5%) is the spread.
If I borrow money at 7.5% and invest it at 12.5%, I am pocketing the 5% difference. I am effectively creating a “cash flow machine” using money that isn’t even mine.
It sounds perfect on paper, but in reality, it requires iron-stomach risk management. If the market crashes, the brokerage can issue a “Margin Call” and force me to sell my assets at a loss. This is not a strategy for the faint of heart.
Despite the risks, I wanted to accelerate my income snowball. So, I took out $70,000 in margin debt to buy high-yield stocks.
Here is exactly what I bought, how I hedged the risk, and the results of my experiment.
⚠️ A Critical Disclaimer
Using margin involves significant risk. You can lose more than your initial investment. This article is a documentation of my personal strategy and risk tolerance, not financial advice. Never use margin if you do not fully understand the mechanics of a margin call.
The Margin Debt Results
I used the margin debt to purchase some of the highest yielding risky option ETFs.
These are funds that are active managed by professionals that write options and use premiums to pay out dividends. These funds can offer massive dividend yields ranging between 20% upwards to 100%! I shifted some positions around as the year went on, but I remain holding the following positions high-risk, high-yield positions:
