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What are the benefits of availing MTF Facility?

Post Date : March 4, 2022

What are the benefits of availing MTF Facility?


Introduction:

Margin Trading Facility (MTF), often considered a financial magic trick in the world of markets, offers buyers of shares and securities a special privilege. It allows them to trade with more money than they actually have. Let’s explore the benefits of MTF in simpler terms!

With MTF, you can become a better trader without needing to pay the entire trading cost upfront. Instead, you only need to put down a small part of the total cost, called “margin.” This new idea lets you use both money and shares as this margin, making your trading strategies more flexible. Even though the value of shares is adjusted, this opens up many ways to make the most of your potential.

The most exciting part of margin trading is that it can boost your investment power a lot. Imagine this: if you have Rs. 1 lakh, a friendly broker might give you another Rs. 2 lakhs, letting you control shares worth Rs. 3 lakhs! This is really helpful, although you do need to pay some interest on the extra money you borrowed. But now, thanks to rules from SEBI, you can even use shares you already own as collateral. This keeps your precious money safe and makes better use of your holdings.

MTF is carefully watched over by SEBI, so it’s a safe and clear way to trade. The broker feels more confident because of the collateral, which leads to better deals for you. While it’s only for certain well-traded stocks, this rule keeps risks lower and adds more safety to your trading adventures.

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The Benefits of Margin Trading: 

  • Margin trading offers an attractive solution for investors seeking short-term price movements but lacking sufficient cash balances. This trading approach bridges the gap, providing much-needed liquidity to capitalize on market opportunities.
  • Furthermore, the margin trading facility becomes a valuable resource when shares lie idle in your demat account. By leveraging these stocks as collateral margins, investors can enter MTF positions in the equity market, making efficient use of their assets.
  • Another advantage of margin trading lies in its potential to improve the percentage return on the capital deployed, leading to enhanced Return on Equity (ROE). When you are trading on margins, you only pay around 25% of the cost. So, if the price moves up by 5%, it is a 20% ROE gain for you.
  • Additionally, the margin trading facility can prove crucial in seizing gainful buying opportunities that might otherwise be missed due to liquidity constraints. This enables investors to capitalize on such prospects and grow their investment corpus effectively.
  • It’s worth noting that despite borrowing, the loan is invested in appreciating assets like equity, fostering wealth creation in the long run. This approach aligns with sound economics and fosters a positive trajectory for financial growth.

 


Conclusion (What are the benefits of availing MTF Facility) :

The Margin Trading Facility is undoubtedly a game-changer in the realm of investments. It empowers investors with unprecedented leverage and flexibility, making their financial journey more rewarding and enriching. By embracing the power of MTF, investors can amplify their returns, seize opportunities, and unleash the true potential of their investments. As with any financial endeavor, it is essential to tread cautiously and seek expert advice if needed. So, activate your margin trading facility today, and embark on a journey of financial empowerment and growth!

 

What is MTF facility?

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