I came across this article on SeekingAlpha by Travis Johnson discussing how he is selling positions that he had bought on margin. Margin is often referred to as a double-edged sword as it can do wonders for your portfolio in a bull market but can have disastrous effects in a bear market. Even in a flat market you continue to pay interest to your broker while your stocks are sitting around doing nothing. I have seen many investors lose their shirts and a whole lot more thanks to margin calls from their brokers after their stocks crashed. Hence I like to call margin the mother of all financial evils as far as individual retail investors are concerned. Margin may make sense in some situations such as currency trading, which relies on a large amount of leverage and for institutional traders.
Getting back to the article by Travis, most brokerage accounts are currently charging over 10% interest on margin and his broker was charging him 11%. The historic annual return of stocks since 1925 has been a little over 10% and a significant portion of these returns come from dividends. As you can see from this excellent article in Fortune magazine, some critics argue that in the future, the rate of return from stocks is likely to be no more than 5% or 6%.