Today was National Acadian Day, but for Acadian investors, today wasn't especially a great day on the TSX so I quietly stay in my rabbit hole and I didn't place any new investments. Believe it or not, I just put some money to pay down my margin account!!! For a reason or another, suddenly today, as the TSX was going near under the 16k mark, no investment seem to worth it. And I felt confused. This is supposed to be my special time, but things are not exactly working super great. I guess, for now, paying down my margin will just do the thing.
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TD interest on margin, in a non-President Account, is 5.250% and will keep going up.
Personally, I cannot wrap my head on borrowing 100k$ and paying 5000$ of interest a year for mostly dividend income plays. The performance you'd have to get to out-perform interest and tax (on the dividend) is not sustainable and not safe. Also if that interest cos is on 183,000$ account, it's double (2.7%) than the most profesionnally-managed mutual funds, who know how a bit more about hedging.
In your case, a drop in the economy will probably lead to a margin call, which you won't be able to meet. SInce you're heavily concentrated in PHB, TD might chose to just liquidate and you would lose not the value the stock went down, but that value plus the amount borrowed on margin. Then you'll have to pay the taxes on all the positions that were sold where the sale price was higher than the ave price (say, if you bought the stock years ago). Then you might still owe money to TD after the failed margin call, which might come out of your RRSP, on which you'll not only lose money on the drop of value but also pay taxes. It's the nightmare that never stops.
If I were to "fix" your account, the minimum I would do is buy put options, so you that you at least have a floor agains the inevitable Canadian economy downturn -- it's protection money better spent than on interest.
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