Interactive Brokers Group, Inc. (IBKR), TD Ameritrade Holding Corp. (AMTD): The Biggest Threat to Your Portfolio

The New York Stock Exchange only began collecting data on cash in margin accounts starting in 2003, but you can still see the net value of investors’ margin accounts. The free credit line is inverted so that when the red line is up, that means investors are net in debt, and when the red line is way down, that means investors have more credit and cash in their accounts than debt. In January, investors had nearly $77 billion more debt in their accounts than they had investments and cash.

Sources: NYSEData.com Facts & Figures, St. Louis Federal Reserve.

Foolish bottom line
All these charts show that investors are using leverage at levels not seen since the last bubble to juice their returns. This has ended badly in every previous bubble, and it will end badly again.

Trying to time the bursting of a bubble is a fool’s errand. It’s impossible to get the timing right. I suggest sticking with your investment plan but keeping some cash on the side to buy in case the market takes a big drop. As Thomas Edison said, “Everything comes to him who hustles while he waits.” Take time to carefully research investments and keep a watchlist of companies you’d like to buy at the right price.

The article The Biggest Threat to Your Portfolio originally appeared on Fool.com.

Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway.

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