You're directionally correct, but the threshold is lower. In the US, banks will give you a low-interest loan for up to 50% of your holdings with them (public equities, etc.), starting at $300k. Having $600k+ in liquid investments is unquestionably above middle class, but this strategy is well within reach for many tech people.
But that's for margin. Meaning you use the funds to trade.
It's different than taking a loan against 300k USD in FB shares, because that you can use for everything...ranging from buying a Ferrari to starting a new business.
Is that intentional from IKBR? I guess if they knew they'd raise their interest rate. If people start using this method more and more then it will disappear. Seen this pattern over and over again in many fields.
> having 500k in stocks, selling half of that to get $250k, withdrawing $250k, then rebuying $250k worth of the stocks using margin
Risking money in the financial markets vs. risking them (or again using them) in the real markets are 2 very different things.
There is no equivalent for the SP500 in real life, also real life is very illiquid compared to financial markets.
Plus unless you are very wealthy financial institutions tend to look down on people who want to spend money or have the arrogance to think they can start a business, they always punish such behaviors with higher interest rates.
Also once the money is out of the trading platform and into your checking account you could buy real bitcoin on Coinbase, withdraw to private wallet, flee to South America and never be heard from ever again
>Is that intentional from IKBR? I guess if they knew they'd raise their interest rate. If people start using this method more and more then it will disappear. Seen this pattern over and over again in many fields.
if you search around this method has been around for a while, so it's not some sort of glitch. Plus like I said earlier, it's not any different than using the money to buy stocks.
>Also once the money is out of the trading platform and into your checking account you could buy real bitcoin on Coinbase, withdraw to private wallet, flee to South America and never be heard from ever again
I don't think you understand how this works. They still have your stocks. If you flee to south america they don't really care. Should you fail to meet your maintenance margin your stocks will be liquidated to pay back the loan.
>Plus unless you are very wealthy financial institutions tend to look down on people who want to spend money or have the arrogance to think they can start a business, they always punish such behaviors with higher interest rates.
I think you're ascribing ill will where there isn't any. Banks charge high interest to business and/or personal loans not because they hate poor people or whatever, but because they're risky.
> I think you're ascribing ill will where there isn't any. Banks charge high interest to business and/or personal loans not because they hate poor people or whatever, but because they're risky.
I don't mean to accuse bankers, if anything I meant to stress that this method has something which doesn't add up .
Think about it , even if your net worth is 1M you still have to go through a conversation with the bank before they loan you money. They want to know your intentions, what are you going to do with it and so forth. They size you up, and the 1M net worth doesn't even count as a tool to reduce the burden of questions.
This method instead : you post some securities and you get a loan with no questions asked. It seems too good to be true or intentional from the financial institution side as it completely sidesteps the due diligence process.
>This method instead : you post some securities and you get a loan with no questions asked. It seems too good to be true or intentional from the financial institution side as it completely sidesteps the due diligence process.
It's not any different than going to a pawn shop and getting a loan, no questions asked. They don't ask any questions (aside from any mandatory AML/KYC ones) because they don't need to. The combination of easy to sell/liquid stock and the margin requirement makes it very unlikely that they'll lose their money. If you have $100k worth of stocks, SEC/FINRA regulations means that you can borrow up to $50k, and your portfolio can drop another $25k before they start liquidating your holdings. At that point you still have $75k worth of collateral for $50k worth of loans, so the chances of them losing money is slim.
