Let's say I want to buy CACT.SI with my IB account, I have 1 million US dollars and want to borrow 0.5 millions dollars, what is the margin cost per year and how much margin can I borrow? I am going to hold for years or even longer term but not short term trade.
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Margin cost and limit of IB
- Thread starter GloriaBrown
- Start date
There are no special/higher requirements for C61U:
http://www1.interactivebrokers.ch/c...on=Conid Info&wlId=IB&conid=117901199&lang=en
You should preview an order and look at the maintenance requirement based your account type. It should be between 15-50% (2x-6.6x leverage), so getting 1.5x leverage shouldn't be a problem. As for financing, it depends on whether you're funding it in Singapore dollars or something else. For $500k in SGD, the margin rate is around 1.5-2%.
https://www.interactivebrokers.com/en/index.php?f=interest&p=schedule2
http://www1.interactivebrokers.ch/c...on=Conid Info&wlId=IB&conid=117901199&lang=en
You should preview an order and look at the maintenance requirement based your account type. It should be between 15-50% (2x-6.6x leverage), so getting 1.5x leverage shouldn't be a problem. As for financing, it depends on whether you're funding it in Singapore dollars or something else. For $500k in SGD, the margin rate is around 1.5-2%.
https://www.interactivebrokers.com/en/index.php?f=interest&p=schedule2
There are no special/higher requirements for C61U:
http://www1.interactivebrokers.ch/contract_info/v3.9/index.php?action=Conid Info&wlId=IB&conid=117901199&lang=en
You should preview an order and look at the maintenance requirement based your account type. It should be between 15-50% (2x-6.6x leverage), so getting 1.5x leverage shouldn't be a problem. As for financing, it depends on whether you're funding it in Singapore dollars or something else. For $500k in SGD, the margin rate is around 1.5-2%.
https://www.interactivebrokers.com/en/index.php?f=interest&p=schedule2
Thanks. So I should expect I pay 1.5-2% of 0.5 million per year as margin cost? With 1.5 millions C61U with average around 5% annual dividend, that should be more than enough to pay the margin cost if we don't consider raise and drop of C61U?
Yes, SGD $10k or so in annual financing costs.Thanks. So I should expect I pay 1.5-2% of 0.5 million per year as margin cost?
Well, that would be true of any stock or fund with a 2%+ dividend yield - don't think this is some magic way to make money. Most of the time the stock will drop by the amount of the dividend when they pay it. You could lose 75% in a crash like 2008, which would make your account worthless with 1.5x leverage. Even without a margin call, you'd be -40% vs +40% for the S&P500 over the past ~7 years.With 1.5 millions C61U with average around 5% annual dividend, that should be more than enough to pay the margin cost if we don't consider raise and drop of C61U?
https://ca.finance.yahoo.com/q/bc?t=my&s=C61U.SI&l=on&z=l&q=l&c=&ql=1&c=^GSPC
well I am not try to buy a normal "corp" stock, I am trying to buy a REITs which is basically housing market related not stock market. The up and down is much less that average corp stock and the dividend is more stable and average 5% or more dividend no matter in crisis time, peak time or average time.
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That might be true, I didn't check, but the ups and downs of the stock matter a lot to your broker when you're using margin. Let's say you use your own $100 and borrow another $50 and buy $150 worth of this stock. If the stock drops 66%, your $150 investment is now worth $50 and you owe that entire $50 to your broker (they would have sold you out with a margin call somewhat before this). You will be wiped out and lose everything if this stock drops by 2/3 at your suggested level of margin. This isn't hypothetical - this actually happened in 2008-2009 less than 8 years ago. Do you want to bet your entire $1M that it doesn't happen again, ever?well I am not try to buy a normal "corp" stock, I am trying to buy a REITs which is basically housing market related not stock market. The up and down is much less that average corp stock and the dividend is more stable even in crisis time.
Good luck with your choice and be careful.
That might be true, I didn't check, but the ups and downs of the stock matter a lot to your broker when you're using margin. Let's say you use your own $100 and borrow another $50 and buy $150 worth of this stock. If the stock drops 66%, your $150 investment is now worth $50 and you owe that entire $50 to your broker (they would have sold you out with a margin call somewhat before this). You will be wiped out and lose everything if this stock drops by 2/3 at your suggested level of margin. This isn't hypothetical - this actually happened in 2008-2009 less than 8 years ago. Do you want to bet your entire $1M that it doesn't happen again, ever?
Good luck with your choice and be careful.
Thanks for explain to me the risk and I understand it.
Here is the historical price of that Reits:
http://www.reuters.com/finance/stocks/chart?symbol=CACT.SI
I may not really borrow 50% and not consider current price is low enough yet. I just prepare for future, especially what if US increase interest rate at a surprising speed then properties in a lot of countries crash, then I would get in. Normally I day trade future so long term up and down is not a big deal for me.