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The interest rates seem very high, scottrade charges 8% for less than $50,000
How many of you have experience with it? Do you only pay interest after you buy the stock with the money?
I am considering investing more money into the stock market, but I am running out of cash at the moment because I am 100% invested. I still see very good stocks I want to purchase. Also, I have a lot of equity in my house, is it better just to do a home equity line of credit?
The interest rates seem very high, scottrade charges 8% for less than $50,000
How many of you have experience with it? Do you only pay interest after you buy the stock with the money?
I am considering investing more money into the stock market, but I am running out of cash at the moment because I am 100% invested. I still see very good stocks I want to purchase. Also, I have a lot of equity in my house, is it better just to do a home equity line of credit?
Man, I don't know your circumstances, but I'd RUN RUN RUN from that 8% fee.
Whatever amount you consider to be a good return, add 8% to it. Now you have to earn *that* kind of return with your borrowed capital to have a "good" return on the borrowed funds. Plus, capital gains taxes are still going to bite you. And for that you're considering a HELOC?
Frankly, I think that 8% charge is Scottrade's way of saying 'we really don't want to do that sort of business, but if you really want to, we'll gladly charge you out the ying-yang for it.' I wouldn't have anything at all to do with it.
Frankly, I think that 8% charge is Scottrade's way of saying 'we really don't want to do that sort of business, but if you really want to, we'll gladly charge you out the ying-yang for it.' I wouldn't have anything at all to do with it.
I would disagree with that......Scottrade charging you 8% on your loan makes them a LOT more money that they make in transaction fees. I think they really like having people with margin accounts. Plus, when your shares are margined, the broker effectively owns them, and they have a variety of ways of making money from them (like lending them out).
Look at a broker dealer's income statement. They make a LOT of money from interest income, which is margin money in large part. Borrow at close to zero; lend at 8%. It is a pretty good business.
And a LOT of people love to speculate.....with borrowed money, because they are going to make a killing buying Apple at $500, because it is a $700 stock, right?
Man, I don't know your circumstances, but I'd RUN RUN RUN from that 8% fee.
Whatever amount you consider to be a good return, add 8% to it. Now you have to earn *that* kind of return with your borrowed capital to have a "good" return on the borrowed funds.
Not necessarily. The 8% is an annual fee, so if it's a trade lasting, say, 2 months, the fee would only be about 1.3%. And 8% is not at all out of the ordinary for a margin loan.
That being said, I wouldn't recommend investing on margin or taking out any OTHER kind of loan for the purpose of investing it.
The interest rates seem very high, scottrade charges 8% for less than $50,000
How many of you have experience with it? Do you only pay interest after you buy the stock with the money?
I am considering investing more money into the stock market, but I am running out of cash at the moment because I am 100% invested. I still see very good stocks I want to purchase. Also, I have a lot of equity in my house, is it better just to do a home equity line of credit?
Scottrade charges:
7.25% interest for loan balances between $25,000.00 to $49,999.99
7.50% interest for loan balances between $10,000.00 to $24,999.99
7.75% interest for loan balances between $0.01 to $9,999.99
Example:
Margin Amount: $35,000
Interest Rate: 7.25%
a) $35,000 * 7.25% = $2,537.50
b) $2,537.50 / 365 = $6.95
It will cost you roughly $7 per day in interest based on a margin amount of $35,000.
My opinion:
You shouldn't get a loan for stock investing/trading. We only had a small correction, so this isn't a rare buying opportunity. This isn't the same buying opportunity as in March 2009 by no means. You will probably feel a lot more pressure with your investments on long-term borrowed money. This will probably throw off your trading strategy and end up costing you money. An investor or trader both need to be able to withstand losses. I'm afraid you might get spooked out of your positions on any correction or big dips simply because it's borrowed money.
Also, you shouldn't use margin for long-term positions. Margin is good for day traders. If you buy and sell within the same day, you won't be charged any interest. If you are in margin for only 5 days, your interest will be very small. However, if you hold it for a year, you could be spending thousands in interest.
7.25% interest for loan balances between $25,000.00 to $49,999.99
7.50% interest for loan balances between $10,000.00 to $24,999.99
7.75% interest for loan balances between $0.01 to $9,999.99
Example:
Margin Amount: $35,000
Interest Rate: 7.25%
a) $35,000 * 7.25% = $2,537.50
b) $2,537.50 / 365 = $6.95
It will cost you roughly $7 per day in interest based on a margin amount of $35,000.
My opinion:
You shouldn't get a loan for stock investing/trading. We only had a small correction, so this isn't a rare buying opportunity. This isn't the same buying opportunity as in March 2009 by no means. You will probably feel a lot more pressure with your investments on long-term borrowed money. This will probably throw off your trading strategy and end up costing you money. An investor or trader both need to be able to withstand losses. I'm afraid you might get spooked out of your positions on any correction or big dips simply because it's borrowed money.
Also, you shouldn't use margin for long-term positions. Margin is good for day traders. If you buy and sell within the same day, you won't be charged any interest. If you are in margin for only 5 days, your interest will be very small. However, if you hold it for a year, you could be spending thousands in interest.
Good points BMW. I am preparing just in case 2008-2009 type of market happens again if the debt ceiling isn't raised. thanks.
All my brokerage accounts have margin. I just never really use it. It's there for the convenience.
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