Couldn’t you use the $1000 interest free to buy say JEPQ ETF with a dividend payout of 10.88% that pays monthly and make $9.06 a month off of it? If there is no interest on it when do they expect to get their $1000 back? Is it essentially if your brokerage account falls below $2k you need to pay it back? Seems odd they would essentially let you borrow money indefinitely. It also looks like a way to earn your $5 subscription fee with the right dividend yielding stocks and put a little back into your pocket.
@@BrendanEvanUsing the first 1K towards a dividend paying stock won’t negatively affect Robinhood imo. Technically it ain’t free because of Gold- I have margin on but I only did so because my portfolio pays out dividends so I cover my interest/principal whenever I use the 1K!
Some people (😅) use no interest credit cards to do the same. Just need to be able to cover the money in worst case scenario. And if you can cover it then why not keep going some after that...
I guess I assumed they would intend on paying back the loan, which undermines my understanding of the motive. I don't want to get charged 5-7% margin fees for the rest of my life because I paid myself to avoid a one time capital gains tax. But maybe that's why I'm not super rich and playing that game!
@@milleniallgt9715 another really big factor to consider is that many of the people with massive portfolios aquired many of their shares as options from their employment. You're given millions in shares tax free then take out margin to live your life on and write off the interest. Even better if you're on the board and get the company to pay dividends so the shares pay off your margin for you.
Your not seeing debt as a tool, debt is a tool it does require a different mindset. For most ppl they should first use margin to rid themselves of credit card debt. Then use that extra money to reinvest and pay off the margin
You open a margin account, deposit cash and get your margin limit. The. You withdraw the margin and pay CC of with it. Word of warning make sure you have a significant buffer and a portfolio of solid stocks to avoid margin calls. I always hold 10% portfolio in sgov paying 5% but also very stable to help cushion any market downturn we're seeing this week.
@keephiscommandmentsandlive9860 if you don't have enough stocks to equal twice the debt to pay it off with margin, you'd be better off to just pay off the credit cards before investing. You get a high guaranteed return just by paying off the credit cards because of the interest you save.
It would depend on the brokerage, their apps and websites have different formats. I'm not "too" worried about it. Since it's the stocks at stake essentially, I feel the worse case is starting from scratch in investing (as losing so much that selling all your stocks isn't enough to meet the margin debt feels extremely unlikely). Still, not planning on quitting my day job anytime soon until QQQY gives me enough Dividends to pay off my monthly expenses 4 fold.
U invest in a stock that will minimum make you 5.75% and or your rate is..... so ex....... haha c3 ai, this is million dollar game........then sell at top return and take and be dumb or re invest
@BrendanEvan you have to be super carefull I'd wait till year 3 and I may even wait it's very dangerous and then if you loose. Your going to also LOOSE INTEREST AND THIS IS THE HACK TO FINANCIAL SECURITY......TIME faith most important and patience
No I used like 90% 11k outta 14k . I know someone used 100% of margin . $250k. So I say it depends what you have total and money in case + what you invest in ❓
@@Blackjesussp If you had 100,000 thaen borrow a 100,000 would they allow you to take 100,000 out and then just use only 100,000 to invest and pay the monthly bill or whatever it is
Good video. The only thing you're wrong about is how margin calls work. In theory they could move the maintenance to 100% but if youre diversified correct that would be just one stock and your portfolio wont drop to a margin call
They do it because it's risk free to them. If the debt gets out of control they sell your stocks and pay off the loan. The same reason some people buy treasuries instead of stocks.
Great Video Brendan!! Quick Question: If 2 traders open identical 1 standard lot and 1 person has 1:2 leverage whilst another has 1:1000 leverage. Trade goes out-of-the money by 100 pips and both close their positions, who loses more? or do they both lose $1000 since both positions sizes were identical.
How would I pay the "interest free" $1000 back to Robinhood? I currently have it in SGOV along with $2k. Im also on the 30 day free Gold trial. Unfortunately i feel like i jumped the gun, but your video is great!! Thanks in advance
You just pay back the margin like any other margin, using available cash. If you're paying for RH gold and they keep the first $1k "free" then I assume you don't need or want to pay that back.
The only interest I have in margin is that first $1,000 for interest free, and you can set your margin limit to $1,000. From what I understand, it seems like you can basically get a free $5 (paying for Gold) by investing that in a high monthly dividend (USFR, TFLO, or SDHC or whichever). Then when you're done with RH Gold, sell that dividend stock and repay the margin? I'm also new to margin, I've just come across this in my research, but it seems like the only downside would be that margin call you mentioned. Is that something that's common?
@@BrendanEvan I can't say for sure because I'm not tax expert, but from my understanding it seems like there are few drawbacks, if any. It seems like the only potentially "risk" could be when/if they do a margin call. However, I am under the impression (again, no expert) that is a circumstance that might happen if you use the margin on volatile stocks, like the tech stocks right now, and that getting margin calls is less common on non-volatile stocks and ETFs, like USFR as mentioned. If you happen to do any research on this and come across something definitive, I would love to hear your opinion! All that said, I do think they try to make that $1,000 margin as a perk for paying for Gold, so outside of the margin call my main concern would just be the tax implications. Something else that's funny which I didn't realize is they base your margin off your ability to pay it. I applied out of curiosity once and my maximum allotted margin? $12... LOL. Had about $2,100 invested at the time
Think of it as a running loan that you can perpetuate maybe forever. Robinhood would love that because they charge interest on whatever you borrow. You don’t have regular terms to pay it back like a car loan or a mortgage. It just lingers till you kill it.
As long as your stocks grow faster than the margin interest you never have to pay it off. The rich buy assets, borrow against them tax free until they die. Then their heirs get a stepup cost basis adjusting the price paid up to to value at their death avoiding taxes on the gains. All they have to do is pay back the loan and everything left over is tax free.
The latest trend I’ve seen has been using the 2x margin to buy high yield dividend stocks. In a black swan crash event that might only last a day, week, month, or even a lengthy downturn - margin calls on those stocks will erase any gains and possibly more. I’m not against owning those stocks, but going 1:1 in a cash account makes more sense to me as a way to protect the account for the long term.
To answer your question as to why people would borrow 50M on margin, the answer is because it is not a taxable event. So instead of selling your shares, and paying a huge federal and perhaps state tax, you can simply borrow against your shares and pay a much, much lower rate to do it. It's how the rich avoid paying taxes.
Are there any rules on how they can change apy rates? I'm concerned if they raise those rates by some random number ( probably close to other firms) then that's a lot
I would want to use margin to do weekly option trades with minimum weekly gains of 100-200. If this were the case, I would imagine margin borrowing would be helpful.
LIKED the video, there are good & horrific strategies you can apply utilizing Margin to your advantage generating income consistently, however you must be familiar with good entries, options and most importantly the underlying stock (s) your planning to invest with. Trust me I learned the hard way, but once you figure out a good strategy Margin can become an income generating machine! Good luck to all! Not financial advice!!
You have the same exact feelings I do about margin, but what got me debating it is that interest is charged daily. I don’t like that. If it was monthly I’d go for it. But daily is not good in my opinion.
It's pretty standard for your initial margin on most investments to be 50%. Then maintenance margin is typically 25% before you get a margin call. And that's for Reg T margin. If you get approved for portfolio margin, you may be eligible to borrow a higher percentage if the broker's systems say your portfolio isn't too correlated.
If you own bonds, it doesn't make sense to use margin because you're both longing and shorting debt, which is inefficient. In other words, using margin is the opposite of owning bonds, which are used to lower risk but also lower average returns.
Hypothecation is standard practice on margin brokerage accounts! You could only have a margin call if your equity falls below the required maintenance percentage!
I put my interest free margin (you get $2000 interest free for the next 3 months) in SGOV. It's dividend covers my Gold fee plus then some and it is low risk.
You get charged per day, it shows how much you get charged each day, and you pay every month, on settings it has a great layout. If you don't have enough money to pay on due date, robinhood has the right to sell any of your stocks and etfs to get their money.
@@9thebigcool yes, it adds everyday, goes up and down depending on how much you use. Pretty simple and fair and before using it, it gives us risks and rewards
I too would like to know who is using margin on a $50 million account. Maybe leveraging up their call options on GameStop? 😂 But seriously, you could just take the free $1000 and put it in the brokerage account earning 5%. Or buy some $BIL or $TFLO. Not really advisable for anything else except maybe an emergency.
So when you had the 32,000 in there when you enacted margin and you dumped it down to 1000 I’m thinking about doing the same thing not going too crazy on margin or borrowing too much money. Just listen to my gut and just borrow just enough to know I’ll be OK but yet still make more money. I have Robinhood as well. I know you can make more money borrowing other people’s money using other people’s money but I think I’ll dip my toe and it just a little bit to get a taste and not go too crazy. I don’t wanna end up having to liquidate my assets and lose my shirt.
I have to responded to him about someone borrowing 50 million you really have no insight on the profit and less tax’s someone has to pay. First you have that kind of money you use your money to make more money that’s why rich people are rich. Simple second you. Use every tool not to pay a lot of taxes to are thieve of a government. Common sense can tell you why someone would use a margin on 50 million smh they probably making 500k a day by doing that minimum
I have a feeling you want to based on asking the question, and I'm not a financial advisor so you do whatever you're comfortable with. Whether you do or you don't let us know how it goes!
Instead of selling stock, borrow at 5-6% of interest vs pay the IRS 15%-20% with long term capital gains
Couldn’t you use the $1000 interest free to buy say JEPQ ETF with a dividend payout of 10.88% that pays monthly and make $9.06 a month off of it? If there is no interest on it when do they expect to get their $1000 back? Is it essentially if your brokerage account falls below $2k you need to pay it back? Seems odd they would essentially let you borrow money indefinitely. It also looks like a way to earn your $5 subscription fee with the right dividend yielding stocks and put a little back into your pocket.
In theory it seems that way, but I assume they have some way to make sure they aren't losing money on the deal.
Дайте руский перевод. Спасибо
@@BrendanEvanUsing the first 1K towards a dividend paying stock won’t negatively affect Robinhood imo. Technically it ain’t free because of Gold- I have margin on but I only did so because my portfolio pays out dividends so I cover my interest/principal whenever I use the 1K!
Some people (😅) use no interest credit cards to do the same. Just need to be able to cover the money in worst case scenario. And if you can cover it then why not keep going some after that...
To avoid capital gains tax if all one’s money is in assets.That’s what margin can be used because interest is less then paying taxes
The reason someone would borrow millions on margin is to avoid selling their investments. To avoid a large tax bill.
I guess I assumed they would intend on paying back the loan, which undermines my understanding of the motive. I don't want to get charged 5-7% margin fees for the rest of my life because I paid myself to avoid a one time capital gains tax. But maybe that's why I'm not super rich and playing that game!
@@BrendanEvanmargin interest is a write off.
You can also use it to purchase rental properties also
@@milleniallgt9715 another really big factor to consider is that many of the people with massive portfolios aquired many of their shares as options from their employment. You're given millions in shares tax free then take out margin to live your life on and write off the interest. Even better if you're on the board and get the company to pay dividends so the shares pay off your margin for you.
I’m l😊pp😊😊
Your not seeing debt as a tool, debt is a tool it does require a different mindset. For most ppl they should first use margin to rid themselves of credit card debt. Then use that extra money to reinvest and pay off the margin
This 100%
Wow can you tell me how that works because I have a BIG credit card debt??
You open a margin account, deposit cash and get your margin limit. The. You withdraw the margin and pay CC of with it.
Word of warning make sure you have a significant buffer and a portfolio of solid stocks to avoid margin calls.
I always hold 10% portfolio in sgov paying 5% but also very stable to help cushion any market downturn we're seeing this week.
@@keephiscommandmentsandlive9860 how much do you have invested in
The amount opens different doors at different brokerages
@keephiscommandmentsandlive9860 if you don't have enough stocks to equal twice the debt to pay it off with margin, you'd be better off to just pay off the credit cards before investing. You get a high guaranteed return just by paying off the credit cards because of the interest you save.
You have not showed us HOW to use margin.
I’m not a big fan of margin for the average investor, hence my lack of instruction
It would depend on the brokerage, their apps and websites have different formats.
I'm not "too" worried about it. Since it's the stocks at stake essentially, I feel the worse case is starting from scratch in investing (as losing so much that selling all your stocks isn't enough to meet the margin debt feels extremely unlikely). Still, not planning on quitting my day job anytime soon until QQQY gives me enough Dividends to pay off my monthly expenses 4 fold.
U invest in a stock that will minimum make you 5.75% and or your rate is..... so ex....... haha c3 ai, this is million dollar game........then sell at top return and take and be dumb or re invest
@BrendanEvan you have to be super carefull I'd wait till year 3 and I may even wait it's very dangerous and then if you loose. Your going to also LOOSE INTEREST AND THIS IS THE HACK TO FINANCIAL SECURITY......TIME faith most important and patience
I think out of all the people that explained margin. You probably explained it the best for Robin Hood.thank you.
Can you use all the margin, or will they come back and say you can only use 50% of it?
How do I turn margin investing off?
The interest rate charged monthly or daily?
Can you use margin and withdraw it cash?
No
If you have dividends that are deposited into your account you can. But you can’t just have a margin amount set and withdraw to cash.
@@KICKOFFFOOTBALL I saw a video that said we can withdraw cash from the margin account and deposit it into our bank account.
Yes
You can, just takes longer to transfer into your bank account though
I’m confused so to get margin called does your portfolio have to go down 25% or 50%? PLEASE HELP
No I used like 90% 11k outta 14k . I know someone used 100% of margin . $250k. So I say it depends what you have total and money in case + what you invest in ❓
Oh and I withdrew $2035 ( I pay about $2 a day %
@@Blackjesussp If you had 100,000 thaen borrow a 100,000 would they allow you to take 100,000 out and then just use only 100,000 to invest and pay the monthly bill or whatever it is
Good video. The only thing you're wrong about is how margin calls work. In theory they could move the maintenance to 100% but if youre diversified correct that would be just one stock and your portfolio wont drop to a margin call
How do I give the money back
Pay off the margin.
Deposit money
@@BrendanEvan I deposit money and it doubles my deposit why that happens? I am on margin
Contact customer support
I guess the question is, why would they loan it out to us rather than take the risk themselves, if it’s a good option? Seems odd to me
Diversification of risk
They do it because it's risk free to them. If the debt gets out of control they sell your stocks and pay off the loan. The same reason some people buy treasuries instead of stocks.
@@travismartinson1813 This makes logical sense! Thanks.
Great Video Brendan!! Quick Question: If 2 traders open identical 1 standard lot and 1 person has 1:2 leverage whilst another has 1:1000 leverage. Trade goes out-of-the money by 100 pips and both close their positions, who loses more? or do they both lose $1000 since both positions sizes were identical.
How would I pay the "interest free" $1000 back to Robinhood? I currently have it in SGOV along with $2k. Im also on the 30 day free Gold trial.
Unfortunately i feel like i jumped the gun, but your video is great!! Thanks in advance
You just pay back the margin like any other margin, using available cash. If you're paying for RH gold and they keep the first $1k "free" then I assume you don't need or want to pay that back.
The only interest I have in margin is that first $1,000 for interest free, and you can set your margin limit to $1,000. From what I understand, it seems like you can basically get a free $5 (paying for Gold) by investing that in a high monthly dividend (USFR, TFLO, or SDHC or whichever). Then when you're done with RH Gold, sell that dividend stock and repay the margin?
I'm also new to margin, I've just come across this in my research, but it seems like the only downside would be that margin call you mentioned. Is that something that's common?
Maybe so! I am actually tempted to try it...
@@BrendanEvan I can't say for sure because I'm not tax expert, but from my understanding it seems like there are few drawbacks, if any. It seems like the only potentially "risk" could be when/if they do a margin call.
However, I am under the impression (again, no expert) that is a circumstance that might happen if you use the margin on volatile stocks, like the tech stocks right now, and that getting margin calls is less common on non-volatile stocks and ETFs, like USFR as mentioned. If you happen to do any research on this and come across something definitive, I would love to hear your opinion!
All that said, I do think they try to make that $1,000 margin as a perk for paying for Gold, so outside of the margin call my main concern would just be the tax implications. Something else that's funny which I didn't realize is they base your margin off your ability to pay it. I applied out of curiosity once and my maximum allotted margin? $12... LOL. Had about $2,100 invested at the time
Can I use that set borrowing limit margin to buy some naked calls ?
So every month u have to payback the loan plus the intrest?To avoid Margin?,has that work?
Think of it as a running loan that you can perpetuate maybe forever. Robinhood would love that because they charge interest on whatever you borrow. You don’t have regular terms to pay it back like a car loan or a mortgage. It just lingers till you kill it.
@BrendanEvan 🥶I was So nervous. 💚💙💜Thank You So Very Much Brendan...
As long as your stocks grow faster than the margin interest you never have to pay it off. The rich buy assets, borrow against them tax free until they die. Then their heirs get a stepup cost basis adjusting the price paid up to to value at their death avoiding taxes on the gains. All they have to do is pay back the loan and everything left over is tax free.
Has there been anymore updates as to when the 1% Deposit Match launches? Seems like they're taking a long time to flip the switch on that.
I haven’t seen a date yet
I just started getting them a week or two ago, so it seems like it's finally out
Can i use the money when I switch to a cash account
Could I just use the free 1000 from gold and invest that so that I essentially just have an extra 1000 to invest with no interest rates?
From everything I understand yes
The latest trend I’ve seen has been using the 2x margin to buy high yield dividend stocks. In a black swan crash event that might only last a day, week, month, or even a lengthy downturn - margin calls on those stocks will erase any gains and possibly more. I’m not against owning those stocks, but going 1:1 in a cash account makes more sense to me as a way to protect the account for the long term.
I'm getting 2k interest free with Gold?
Same
I am as well. But I'm also using 90k.
Found the explanation - limited time for select gold members. Lucky me
To answer your question as to why people would borrow 50M on margin, the answer is because it is not a taxable event. So instead of selling your shares, and paying a huge federal and perhaps state tax, you can simply borrow against your shares and pay a much, much lower rate to do it. It's how the rich avoid paying taxes.
IBK Pro margin rate is in line with Robinhood?
Are there any rules on how they can change apy rates? I'm concerned if they raise those rates by some random number ( probably close to other firms) then that's a lot
@@rahilchawda8582 rules? Ha! Nope. Whenever they want however they want.
I would want to use margin to do weekly option trades with minimum weekly gains of 100-200. If this were the case, I would imagine margin borrowing would be helpful.
They will not loan out your stock or sell it until you drop down below the margin maintenance
LIKED the video, there are good & horrific strategies you can apply utilizing Margin to your advantage generating income consistently, however you must be familiar with good entries, options and most importantly the underlying stock (s) your planning to invest with. Trust me I learned the hard way, but once you figure out a good strategy Margin can become an income generating machine! Good luck to all! Not financial advice!!
Every month do u have to payback the loan with interest together??
@nancykirk2650 Greetings, nah I haven't paid any interest as I only sell puts.
You have the same exact feelings I do about margin, but what got me debating it is that interest is charged daily. I don’t like that. If it was monthly I’d go for it. But daily is not good in my opinion.
I increased my portfolio by 50% using margin during covid.
Could you margin withdraw and put that money in an IRA?
I don't know why not
“What the mind can perceive and believe it can achieve.”
Margin one robinhood sucks especially for option seller's. They use up way too much of your buying power
It's pretty standard for your initial margin on most investments to be 50%. Then maintenance margin is typically 25% before you get a margin call. And that's for Reg T margin. If you get approved for portfolio margin, you may be eligible to borrow a higher percentage if the broker's systems say your portfolio isn't too correlated.
If you own bonds, it doesn't make sense to use margin because you're both longing and shorting debt, which is inefficient. In other words, using margin is the opposite of owning bonds, which are used to lower risk but also lower average returns.
Tell that to the banks! LOL
Hypothecation is standard practice on margin brokerage accounts! You could only have a margin call if your equity falls below the required maintenance percentage!
No thanks on the margin. Great explanation and I agree with your final decision.
Thanks!
lol I did it and it said I can borrow 0 yet I got 12k in rh
Because you need to make more money 💰
@@xavierjones9777 yea I make enough I’m good don’t need to borrow anything
Can’t you take that free $1,000 in margin and put it to work in T-Bill ETF?
I put my interest free margin (you get $2000 interest free for the next 3 months) in SGOV. It's dividend covers my Gold fee plus then some and it is low risk.
My Robinhood account says 6.5% margin rate currently. I guess that means I'll be paying more, if I choose to use it (unless I borrow over $100K).
So will need balance on my account. I don’t have any because it’s all on stocks
Maybe they do it to avoid taxes
Glad i stayed away from Margin Borrowing the first 2 years investing..... cant imagine the DUMB losses i could of wound up in!
Yeah I would have grenaded what gains I had back in the day
It’s not a losing battle if it’s cash flow that’s good debt.
You get charged per day, it shows how much you get charged each day, and you pay every month, on settings it has a great layout. If you don't have enough money to pay on due date, robinhood has the right to sell any of your stocks and etfs to get their money.
Minor clarification. While you get charged per day, but that interest is not due until the end of the month
@@9thebigcool yes, it adds everyday, goes up and down depending on how much you use. Pretty simple and fair and before using it, it gives us risks and rewards
@@9thebigcoolThe totally amount plusAlong with the interest every month?
Rich people use debt to there advantage..
I too would like to know who is using margin on a $50 million account. Maybe leveraging up their call options on GameStop? 😂
But seriously, you could just take the free $1000 and put it in the brokerage account earning 5%. Or buy some $BIL or $TFLO. Not really advisable for anything else except maybe an emergency.
So when you had the 32,000 in there when you enacted margin and you dumped it down to 1000 I’m thinking about doing the same thing not going too crazy on margin or borrowing too much money. Just listen to my gut and just borrow just enough to know I’ll be OK but yet still make more money. I have Robinhood as well. I know you can make more money borrowing other people’s money using other people’s money but I think I’ll dip my toe and it just a little bit to get a taste and not go too crazy. I don’t wanna end up having to liquidate my assets and lose my shirt.
I have to responded to him about someone borrowing 50 million you really have no insight on the profit and less tax’s someone has to pay. First you have that kind of money you use your money to make more money that’s why rich people are rich. Simple second you. Use every tool not to pay a lot of taxes to are thieve of a government. Common sense can tell you why someone would use a margin on 50 million smh they probably making 500k a day by doing that minimum
How do I close down the margin account? I don’t ever want to use it nor get taxed interest on it.
Pay off the margin and then disable the account
You can also switch from a margin account to a cash account
love this 🤣🤣.
6.75 v. 12%+ others
IBKR is also super competitive
Is it worth using margin on the upcoming NVIDIA stock split?
I have a feeling you want to based on asking the question, and I'm not a financial advisor so you do whatever you're comfortable with. Whether you do or you don't let us know how it goes!
no
U could’ve made 20%
$1,000 interest free is a great deal....
NGL I AM tempted to stash it in something to generate income
30s, I also don’t want to lose my @ss
lol its still 6.75 nobody putting in that much.
Burrito!! Burrrrritoooo!
🌯 🌯 🌯
at least get the free$1000
burrito
Where's the liquor and ladies? 😂
Beta
I don’t think that’s what they meant by securities. I think securities are considered shares not money.