So I decided to buy a car, but don't have all the money on hand.
I have Interactive brokers account and it was opened as "margin account" from the very beginning (did not select this on purpose).
I have some securities there (not on margin), and I am tempted to take margin loan (good interest rate) to finance the car, instead of taking personal loan from the bank.
Now my worries - since I want to keep status of private investor, if I take margin loan, it would essentially look like I bought securities on margin? This is one of the points which qualifies for professional trader classification. Am I understanding this correctly?
No, your logic is all messed up. The infamous Kreisschreiben 36 says only "if you satisfy these 5 criterias, you are guaranteed to not be considered a professional". How the hell did you get from there at the implication "if i violate one of these, i am a professional"? You're probably still not, don't flatter yourself.
I did search this forum, and from some of the posts I get the idea it is more of "if you satisfy at least some of listed criteria" then it is up to local authorities to decide your tax status.
Also I don't need to submit tax returns, so I guess they are not interested in small fish anyway.
Yes, and why do you think you would qualify to be a professional? The definition of a professional is far more involved than just any person who violates some of those 5 criterias, that's where your logic is wrong
Use of margin is a minor criteria anyway, in fact if dividends cover margin interest it's even totally kosher, you'd still be covered per that Kreisschreben
You might be required to file if you have significant portfolio (like, 6 figures in wealth or 4 figures in divs). And it could be advantageous to file as you can deduct interests from income
Yes you can withdraw your margin loan directly to you bank account. I try to never go above 20% loan value to avoid IB automatically selling stock to cover the loan in the event of a market crash.
Essentially you are borrowing against the value of your share holdings. My broker also allows that. However be aware, that in the event of a market crash or bear market, you may get a margin call, which means you have to deposit money into your account to cover any shortfall, otherwise they will just sell enough shares to cover themselves. Some brokers give you as little as 1 hour to satisfy the call, but in fast moving markets they can sell without any warning.
A stock broker is not a bank and it is not licensed to give loans to the public. A margin loan is given specifically for the purpose of investing with the broker. Be very careful about using such a loan for any other purpose as the brokerage could decide to make a criminal complaint - obtaining funds by deception. So before trying it - ask and make sure.
You have no idea what you're talking about, do ya? Why don't you go check in yourself with swiss police for deceiving the public with your cluelessness and stop embarrassing yourself
Whether or not a broker would allow to wire money out of an account and allow it to go into minus on a margin is contractual matter, up to broker and terms of your relationship with them. IBKR does allow withdrawals on the margin and doesn't ask nor care how you use the money they wire you. They are just going to sell your stocks if shtf, and way before they risk any losses
Agree, totally wrong info. If IB are willing to give a loan against your holdings, it's certainly not breaking any laws.
As I said above, the only caution is a margin call should it come, and my advice (unless the loan represents an extremely small part of your holdings) is to "repay" the loan as you would to the bank.
I don't know, but they may charge a higher rate if you take the money out rather than invest in more shares. I know this is the case with some brokers but IB are pretty competitive.
I get the mechanics of this...but I don't understand the underlying rationale.
We all want a better car but to "mortgage" an investment now to fund it sounds wrong to me (and I am an expert in "man maths" to justify better and better cars!).
On the one hand interest rates (on this loan) have only one way to go, and margin call risk is increasing as (some) share values are adjusting down - your exposure is probably going to worsen over time.
On the other hand car prices (new & used) are currently un-naturally inflated by shortages of good stock, this will correct as we recover from post-covid chip shortage etc so cars will devalue more than has been the case over the last two years.
This may have been an awesome plan 2.5 years ago - buy heavily into exotic cars funded by almost free money and sell them all now, but that ship has sailed.
Your point is very correct. I just saw an opportunity to handle cash flow differently. All proceeds from selling the old car would go to lower margin loan. I don't expect for all this arrangement to last longer than 1 year.
This is definitely not an intent to mimic 5 year leasing.
0.75-1.5% interest rate, that's why. Where else can you get the money this cheaply as a retail non-mortgage client?? OP plainly said he doesn't have the whole sum he needs in cash, so he's borrowing either way - by pledging the car, stocks, future salary, etc. Swiss banks are going to charge him 5-10%, IBKR only 1.5% or so.
When providing the details for the withdrawal from IB, without having entered the amount, you're shown how much you can withdraw with margin and without. Of course it would be very foolish to make extensive use of the latter as that may well subject you to margin calls sooner or later.
Using a little margin you can pay back within a year or so - why not (as long as you're aware of the risks). Far cheaper than consumer credit, better flexibility, and zero paperwork.
Asking your employer for a couple monthlies credit may be another very practical option, and proabably without interest. IMHO your best option where available, perhaps fill the remainder up with margin but make sure payback is covered easily.