Interactive Brokers Interest/Margin Rates

[Tim Smith]

I guess the 'next' option up would be working as a professional/institution directly through/within an investment firm (and therefore get better margin rates)

You may (or may not) get better rates working for an institution.

But in return, you've got all the crap associated with compliance and the hoops you have to go through to do PA trades.

And that's assuming your firm's PA policy even permits speculative and/or leveraged trades, many restrict to buy & hold cash investments with minimum 3 month hold.

If you're not already in the industry, I certainly would not try to get in just to get lower rates ! What you save in fees you'll loose in paperwork !

 

[zdreg]

Which begs the questions: Why hasn't a competitor setup shop to offer rates that are close? a 2.0% to IB's 1.81% would be competitive enough, yet I have yet to see one.

Generally market forces should have done something here

non-traders suffer from inertia. investors who are dependent on brokers for advice are clueless. investors who are dependent on investment advisors are essentially clueless. there are certain brokerage firms who give perks(bribes) to bring their clients to them. european firms are even worse. there are american brokerage firms with higher fee schedules for European clients. if not for IB other firms would charge much higher minimum
commissions than e.g. $7.95.
to some extent market forces forced down commission rates but not margin rates.

 

[comagnum]

Good investors don't need margin and bad ones get killed by it. - Warren Buffet

 

[murray t turtle]

Good investors don't need margin and bad ones get killed by it. - Warren Buffet

%%
Great quote comagnum; Like his rule number #1= ''never lose money '' But if that's all we want-- bank CDs are better LOL. He also like$ ''hold forever'' But i think IBD[Investors Business Daily] 50 dma-200dma is more helpful; they teach get off margin[ more risk] in an older bull market.............................................

 

[MoreLeverage]

Good investors don't need margin and bad ones get killed by it. - Warren Buffet

What's wrong with margin? Don't all you elite traders want to get rich quickly instead of slowly? .

 

[HappyTrader]

There are multiple good uses for margin. Not just as a means of 'owning more' so you can make more. A very basic example is to be fully invested and want to take advantage of a sudden market move (severe over-reaction to an earnings report but you see something worthwhile to invest in): So you buy the positions on margin.

You don't want to close out your other positions (bad time to sell) to cover the new acquisition. Therefore you could be on margin for a while until its time to sell.

If you are dealing with 1M in safely invested assets (blue chip stocks for example) there is nothing wrong with going 100k on margin while waiting for a good time to cycle out another position.

(I'm not sure Buffett was pooh-poohing this idea. I think he was mostly against the having 1M in assets and then getting 2M more on margin. Very different scope/purpose).

 

[Shadetree42]

Good investors don't need margin and bad ones get killed by it. - Warren Buffet

This would only be true if you were managing a long-only account. Otherwise, it's a load of sh!t.

 

[Tim Smith]

This would only be true if you were managing a long-only account. Otherwise, it's a load of sh!t.

Unfortunately not, you are the one who is incorrect.

Do you honestly think professional traders, sitting in banks and elsewhere are sitting there using 200:1 leverage ?

Leverage is very much a retail thing.

And, as Warren Buffet says, leverage has killed many. Why do you think so many trading companies run B-Books ? Its because they know the losses of the many will pay for the wins of the few (as well as trading company's offices and staff).

 

[beefcaketrade]

I think it comes down to how fast you want to make money. How desperate someone is.

It's so easy for already wealthy people, or people with a large trading account from clients, to talk down on margin or leverage. Because they have tonnes of money. A few % real gain and it's some real $$ there.

For people with small accounts, it's more like 'gambling' I guess. Throw more risk in there. All or nothing, trying to make money with what little they have. Margin allows them to get more returns if it works out, of course also lose more if it works against them. But that goes with the territory of "all or nothing" based on a gambling mentality. As long as they are aware and willing to risk it, can you fault them for trying?

However, everytime I hear wealthy 1% of the 1% people talk down leverage, I am reminded of wealthy people who espouse the virtues of inflated 'organic' food versus the garden variety groceries with all these nasty 'pesticides' and 'hormones'. So icky, they tell you. So unhealthy. Rolls eyes and thinks to myself, out of touch much?

 

[Tim Smith]

For people with small accounts, it's more like 'gambling' I guess.

Its nothing do do with how wealthy someone is, its all about risk.

As long as the people with small accounts are prepared to admit that they are effectively gambling and recognise the very real risks they are taking, then I've got no problem with that.

The problem is most retail traders who use leverage don't do that.

They over-leverage, over-trade and join the 99% of people before them in becoming big-fat loosers because the leverage kills them off sooner or later.