Margin loan under my wife's name - help

[arruga]

Hi
I got all my stock holding under my wife's name...for tax purposes obviously (she has no salary, so just income from dividends).
I wanna take a margin loan and keep investing under her name, but now gearing 50%....I can service the loan easily with my salary, but if I take the loan under my name using her holdings as 3rd party security, I cannot invest in shares under her name...Obviously I cannot take the loan under her name as she can not service the loan....what's the best way around this ?
thanks
a.

 

[robusta]

Can you go guarantor?

 

[tech/a]

Simply open an account in your wife's name with IB and you automatically have a
margin facility of 2:1 available to you no applying no questions its there ready to go whether you use it or not.

 

[qldfrog]

Simply open an account in your wife's name with IB and you automatically have a
margin facility of 2:1 available to you no applying no questions its there ready to go whether you use it or not.

Hi tech/a,
does this not raise alarm as to the actual future health of IB?
Sounds similar to these no question asked HL in the US before the GFC?:bad:
I do not use IB but this would worry me if I were

 

[tech/a]

Hi tech/a,
does this not raise alarm as to the actual future health of IB?
Sounds similar to these no question asked HL in the US before the GFC?:bad:
I do not use IB but this would worry me if I were

IB have had it available to all clients for as long as I know ---- 20 years.
It's not compulsory to use.

Futures have leverage of ( some ) 100:1

It's not the leverage which is the issue it's how people use it.

As far as your concern ----- any broker " could go belly up " so if you have over $100,000 funds
---- the amount guaranteed with IB ----- from memory --- and your worried then split it between
Others. Use IB for some leveraged trades.

 

[skc]

Hi
I got all my stock holding under my wife's name...for tax purposes obviously (she has no salary, so just income from dividends).
I wanna take a margin loan and keep investing under her name, but now gearing 50%....I can service the loan easily with my salary, but if I take the loan under my name using her holdings as 3rd party security, I cannot invest in shares under her name...Obviously I cannot take the loan under her name as she can not service the loan....what's the best way around this ?
thanks
a.

You sure about that? Guarantor might be a way around it like Robusta suggested.

 

[elbee]

IB have had it available to all clients for as long as I know ---- 20 years.
It's not compulsory to use.

...and IB monitor margin levels in real time and will automatically begin liquidating a client's positions if portfolio value falls below margin requirements - thus protecting themselves and other clients. I believe the insurance level on securities accounts is $500,000.

 

[Garpal Gumnut]

Hi
I got all my stock holding under my wife's name...for tax purposes obviously (she has no salary, so just income from dividends).
I wanna take a margin loan and keep investing under her name, but now gearing 50%....I can service the loan easily with my salary, but if I take the loan under my name using her holdings as 3rd party security, I cannot invest in shares under her name...Obviously I cannot take the loan under her name as she can not service the loan....what's the best way around this ?
thanks
a.

I did that with the third Mrs Gumnut, and it is not a good idea. I haven't told the fourth.

gg

 

[tech/a]

I did that with the third Mrs Gumnut, and it is not a good idea. I haven't told the fourth.

gg

Guarantor isn't a good idea on anything.
A friend who is a single mum covered her son on a new car
40k
In a cruel twist son was killed in the car
And at autopsy was found over the limit.
Insurance refused to pay.

She is Stijl paying off the car.

 

[tech/a]

Just a thought.

Do you know how to use margin without increasing your risk
OR do you see this as a way of increasing your capital base by X times.

Just to see where your at.

 

[arruga]

Just a thought.

Do you know how to use margin without increasing your risk
OR do you see this as a way of increasing your capital base by X times.

Just to see where your at.

Thanks everyone for the replies.
Well, it can't be risk free, can it ? but am confident that my portfolio will perform good over the coming time, so I wanna leverage and make money with lender's money.....haven't used margin loan before, but it suits my risk/reward profile and have done the research so wanna go ahead....do you have any specific recommendations ?
Now, I would be willing to be guarantor, but after a long talk with BT Financial group over the phone, they simply said that my wife is not eligible for a loan, so I'd need to take the loan on my name....so, you guys are saying that I can indeed be a guarantor and take the loan on her name ? does it depend on the lending institution then ? I went with BT as I operate with Westpac On Line investment, and with BT margin loan I can link the accounts and do everything in the same platform...suggestions are welcome. thanks, a.

 

[tech/a]

From your responses I would not recommend you use margin.

 

[arruga]

From your responses I would not recommend you use margin.

Appreciate the advice, but I feel a bit insulted...can you please expand ? There's a starting point in every road....how did you get into your first margin loan ? I could use your advice.

 

[Trembling Hand]

Appreciate the advice, but I feel a bit insulted...can you please expand ? There's a starting point in every road....how did you get into your first margin loan ? I could use your advice.

There is two ways to use leverage only one is the correct way - unless you wear boots with spurs and a big hat...:cowboy:

Leverage should be use to increase position over time using something like fixed fractional position sizing. That is the sensible and mostly proven way to use leverage. Not by simply taking your $100,000 and magically turning it into $200,000 and swinging twice the size holdings.

Even when using leverage with FFPS you still have to worry about portfolio heat but you're probably talking about 10%-20 % rather than the 50% to 100% level I suspect you are about to get yourself into with,

so I wanna leverage and make money with lender's money..

All this is probably new to you and that is where Tech/A's comment is coming from.

 

[tech/a]

Lets see if we cant alleviate the insulted feeling.

Firstly you didn't directly answer my question--by that I see that as a no.

Thanks everyone for the replies.
Well, it can't be risk free, can it

not Risk free but no more risk than if you were trading a portfolio which was not leveraged.

but am confident that my portfolio will perform good over the coming time,

This confidence is it a personal "feeling" or is there something that gives you this confidence specifically?

so I wanna leverage and make money with lender's money.....haven't used margin loan before,

In the right circumstances it makes perfect sense to use other peoples money

but it suits my risk/reward profile and have done the research so wanna go ahead

I read this as Im happy to take risks---can you explain "Done the research?" research into what and the results that you speak of ?

....do you have any specific recommendations ?

With regard to margin trading T/H has touched on one---fixed Fractional position sizing---but I think your a long way from there at this point.

Now, I would be willing to be guarantor, but after a long talk with BT Financial group over the phone, they simply said that my wife is not eligible for a loan, so I'd need to take the loan on my name....so, you guys are saying that I can indeed be a guarantor and take the loan on her name ? does it depend on the lending institution then ? I went with BT as I operate with Westpac On Line investment, and with BT margin loan I can link the accounts and do everything in the same platform...suggestions are welcome. thanks, a.

You will need to meet any financial institutions criteria.

After your reply to my queries above I'll wrap up for you.

 

[arruga]

After your reply to my queries above I'll wrap up for you.

Ok. This is the thing.
I decided two months ago to invest 150k in stocks..why ? well, you know the story: we may have hit bottom, consumer sentiment is slowly returning, the worst has happened in europe, some postive signals in the states, china keeps growing strong (though constrained growth), emerging markest may flourish, etc , etc, etc. Though volatility is here to stay, we may be set for a bull market. Tons of reading, research, more reading, spreadsheets, simulations, sensitivity analyisis, forum discussions, etc. I'm very methodical, rigurous, pragmatic and hard-working, so I decided to go for it.
I got three portfolios: 1) Large-cap blue chip income stocks, 2) Small-cap growth stocks, 3) ETF's to access US, China & Emerging markets.
In total I got 25 stocks spread out over these three portfolios. I know it may be a bit of overdiversification, which will dilute me and prevent me from large gains, but since I'm new to trading I prefer to play safe and observe what happens during the coming year.
Income stocks were picked following a top-down analysis, whereas growth stocks werer picked from bottom-up. In each case, I picked stocks based on fundamentals. I'm not an active trader, and don't want to become one. I'm here for the long run, and my uderpinning portfolio management strategy would be tactical asset allocation, where I will review quarterly my portfolio and will rebalance it. My risk-management strategy was simple: diversification, where I abide simple rules: no more than 5% of total equity in one single stock, no more than 15% in one single ETF, no more than 25% in one single sector. Position sizing method was this; after selecting stocks to invest in in each portfolio, I worked out the allocated dollar amount to each stock. I purchased that amount in each stock in three stages to apply dollar cost averaging.
For example, I allocated 50K to my ETF's portfolio. In this, one of the stocks I picked was iShares FTSE China 25 (IZZ), and allocated 18% of the portfolio budget to it, i.e., 9k. I purchased 254 shares in three stages (totalling 9k). Didn't see the need to set a stop loss, as my portfolio is highly diversified. In this case, by following the 2% rule, and working backwards Vince's formula (FPPS), I would need a stock price drop of 34% for the loss to represent a 2% of the total equity. So, no need for a stop loss. However, as my overall portfolio has made a sweet profit of 7k in two months, I may lock in those gains by setting soon some trailing stops (not sure yet about this...I see a conflicting approach with tactical asset allocation...by seting a stop you liquidate a position, whereas with actical asset allocation you just rebalance your portfolio...maybe set alerts to flag times when rebalancing is needed...need to work this out....comments welcome)
Now, I'm thinking of taking a margin loan to leverage. I wanna start conservative, so I would select the safest stocks of my portfolio whose market value total 50k, and would take a 50k loan (50% gearing) to increase those positions. If the stocks are well selected, no need to touch them, just keep an eye on my portfolio and maintain my 50% gearing. I intend to implement a regular gearing plan, i.e. invest a $1000 every month and take a further $1000 loan to increase positions or diversify into new shares.
I find this forum an invaluable tool and advice for experienced investors is always appreciated.
cheers

 

[Trembling Hand]

arruga your success till now has more to do with lucky/good timing than anything you have listed above. Your problem is you will not know until its too late if your "system" is broken and you'll be doing it with someone else's money.

 

[arruga]

arruga your success till now has more to do with lucky/good timing than anything you have listed above.

I know....I don't get excited with short term results and fluctuarions within a volatility envelope...I'm here for the long run

Your problem is you will not know until its too late

Well...it's a learning experience....advice towards knowing better is useful

if your "system" is broken

All of what I said is rubbish ? If not, can you specify what specific elements should I revisit ?

and you'll be doing it with someone else's money.

So, are suggesting that I shouldn't be using margin loan ? Or, further, you're suggesting that I take my money out altogether and I shouldn't be investing in stocks at all ? Again, what I'd appreciate is guidance towards knowing better and improving investment strategies and techniques. Thanks

 

[tech/a]

I'm afraid I had quite a reply that took over 1 hr to type
I just deleted it some how.

Dont have the time or inclination to do again.

Good luck in your investment journey.

 

[CanOz]

Hmm, maybe this is an indicator of things to come...Retail mom and pop investors using leverage again...

CanOz