Levered Discipline: Why I Borrow When You Sell
Converting Liquidity Risk into Alpha with Margin
Not financial advice. This is a transparent look at how I personally use margin to build exposure across market cycles without crossing into reckless territory.
The Morning on Folsom
I was on the Muni bus heading into FiDi one Monday morning, Yerba Mate in hand, watching the city wake. Panic gripped the world: tariff fears were hitting hard. By the time my bus rolled past Market Street, I was clicking “buy” on a $6,000 bundle of my favorite stocks. This was April 7, 2025, just after “Liberation Day”, and the world felt broken. But I wasn’t calling a bottom; I was executing my rules.”
We tend to think of modern capital markets as expressions of information: fast-moving, efficient, rational. But in stress, they become expressions of time. Who needs cash now? Who can wait? Every sell-off is a sorting mechanism, separating capital that must act from capital that can choose. The difference isn’t insight; it’s maturity date.
The best trades in the worst moments don’t come from having better forecasts. They come from having a longer horizon and the liquidity discipline to survive into it.
A Tale in Two Moves
Just days earlier, on Friday April 4, markets had cratered under the weight of headline-driven liquidation. So I deployed another $6,000. Not as a reaction, but as a scheduled response, the second in a sequence governed by fixed rules, not feelings. My margin utilization was now sitting around 50 percent, intentionally low. That cushion wasn't an accident; it was earned by months of paying down debt during the calm.
I didn’t try to catch the pivot. I don’t believe in catching pivots. I believe in staying liquid until others aren’t, maintaining more market exposure than simply “timing the market” and then scaling into their urgency without exceeding my own risk ceiling. This strategy is a retail-scale version of time arbitrage: I buy from those with liquidity constraints, not just fear. The playbook is simple but unforgiving: add incrementally, respect thresholds, and repay relentlessly.
The first $6,000 was my opening move: not because I knew the bottom was in, but because the strategy doesn’t require that kind of certainty. It requires space, discipline, and a time horizon longer than the forced seller across the table.
The Rules, in Practice
Start with Light Exposure
Around 15 percent loan utilization in calm or slightly elevated markets.Pay Down, Don’t Buy
Each month I allocate cash to reduce my loan, not to increase market exposure.Scale into Panic
During April’s tariff-induced drawdown, I added 10 to 15% percent per day, capping total usage at 65 percent.Defer the Exit
Continued monthly repayments, regardless of market moves, reset capacity and reduce risk.
The result: I increased exposure through fear without overleveraging, and reduced interest drag every month. By using margin selectively, I get more market exposure at any given moment and pull my DCA effects forward. That means more time in the market without surrendering discipline.
Why It Worked This Time
The drawdown from the "Liberation Day" tariff shock dropped the S&P more than 10 percent in two days.
I deployed margin systematically: $6,000 on April 4, and $6,000 on April 7, staying well under my 65 percent margin cap.
By May, markets started reversing as tariff talk cooled.
Yesterday, June 29, SPY hit a new all-time high, closing above 617. That capped the cycle I leaned into.
The Math and the Mechanism
Typical equity return: 8.5 to 15 percent per year (Trade liquidity risk for alpha over standard market 7 to 10 percent per year)
Margin cost: Approximately 6.25 percent using M1 Finance
Drawdown timing: When the market was 10 percent off highs, margin gave me cheaper entry points
Loan reduction: Paying down the balance monthly reduced interest cost and re-opened room to act again
In this case, my April purchases at depressed prices amplified a modest spread, and compounded steadily into the rally.
Note: I borrow up to 65% of my available margin capacity, not 65% of my total account value. Most brokers (including M1 Finance) allow margin up to 50% of account equity. So at 65% utilization, I’m borrowing no more than 32.5% of my account value, keeping my total exposure well below 1.35x. This leaves room for large volatility and ensures I stay far from forced liquidation thresholds.
Behavioral Discipline
This isn’t curve-fitting; it’s system design. Markets panicked in April, but I didn’t. I followed rules, not headlines. I didn't try to catch the bottom. I scaled in deliberately, used fixed intervals, and stayed within self-imposed ceilings. Then I boxed the recovery by steadily paying down debt.
We’re effectively providing liquidity to investors who misjudged their liquidity risk. The first wave of sellers usually underestimated volatility and now need cash on a 3 to 12 month timeline. We step in to buy their urgency, using the advantage of our longer time horizon.
They mispriced time, not just risk. Their compressed timeline becomes our entry point. Their exit becomes our return. That’s how leverage becomes disciplined, liquidity risk converts into alpha, and conviction outlasts panic.
The Risks
Let’s be clear: this strategy assumes you can do three things consistently:
Withstand drawdowns without panic selling
Generate predictable monthly cash flow to reduce the loan
Understand your broker’s margin requirements and thresholds
And most importantly: you must access low-cost borrowing, such as M1’s 6.25 percent rate. This does not work with credit card-level APRs or if you treat margin like free money.
Final Thought
I borrowed in April while others sold, not because I knew the bottom was in, but because my rules were built to act when others can't.
Yesterday’s all-time high didn’t validate a trade; it validated a framework. One designed not to predict markets, but to price time, liquidity, and behavior more accurately than the crowd.
Most investors either buy too early or wait too long. They drip into strength or chase reversals. This strategy sits outside that binary. It uses time as leverage, not hope. It pays down risk, not just prices.
This is the rare case where you can have your cake and eat it too: not by being smarter, but by being structurally patient. I buy when cash is scarce, not when sentiment is strong. I hold through uncertainty because I know my exposure. And I reduce risk as the market rises, not after it turns.
Bought on a bus, paid down monthly, capped at every step. This isn’t a strategy for timing the market: It’s a system for outlasting it.