Margin Trading

[manlymatt83]

Used to do this a while ago, forgot about it. I'm approved for it at my other brokerages, was going to try to turn it on at Sharebuilder. I understand how it works, and the leverage is nice. I understand the risks. But, it seems Sharebuilder approves people based on how they answer the questions. There are four objectives: Growth, Speculation, Preservation of Capital, and Income.

Since I have a decent amount of money invested, it probably would be cool to use this option/feature. What do the above objectives mean, and which is more likely to get you approved?

 

[Crono]

Preservation of Capital

 

[nickbits]

BUT:
Speculation- gambling
Preservation of Capital- trying to not lose money/just beat inflation
Income-investments pay dividends
Growth - want stock prices to go up

Pick whatever one is closest to what you're doing, but I'm pretty sure it doesn't matter, it is just a formality.

 

[manlymatt83]

hmmmm... wonder why more people don't take margin loans out. 4.5% - not bad...

 

[JS80]

check them all off.

if you're worried about margin calls i would stick with levered ETFs (SSO, QLD).

 

[manlymatt83]

Originally posted by: JS80
check them all off.

if you're worried about margin calls i would stick with levered ETFs (SSO, QLD).

I'm not worried at all about margin calls. I'd have the finances to cover if needed.

 

[nickbits]

Leverage is what caused this finaical mess as well as the great depression. In theory margin sounds great, 4.5% loan average return of 8-10%. BUT when the market takes a dump you get a margin call and HAVE to sell at the worst possible time.

If you are serious about margin you should checkout Interactive brokers, you can get USD for 1.62%. But you need to know what you are doing, they don't cater to newbs.

 

[ponyo]

Margin is a double edged sword. Based on your stock posts I've read, stay away from margin. It only takes 50% loss to wipe you out to zero if you're 2:1. Plus, you seem to like to dabble with penny type stocks under $5 which at most brokerages are not marginable. If you have the money to cover potential margin calls, just go ahead and use it and stay off of margin. If you're looking for extra juice, take a look at 2x or 3x levered ETFs.

Brokerages should really set the minimum requirement to have margin account to $25,000 just like the daytrader status.