Put money on your brokerage account then borrow against it

Today, we are going to talk about one strategy that is use to increase and maintain financial wealth.

This is my opinion base on my perspective. This is not legal advice, you ought to do your own research and invest at your own risk.

Borrow money

Borrow money generally is when you receive money from someone else with the intention of returning the same amount of money that you took from that someone plus interest.

Brokerage account

Brokerage account is type of account that can hold your financial assets such as securities. Which in turn allow you to buy or sell the securities. You can think about stocks, you can buy and sell stocks, etc.

Borrow against your own money

You can start putting money on your brokerage account with the intent of making money in the long run. So, you are investing because you want the money to grow.

You then can borrow money against your investment, in other words borrow against your own money. It’s call a margin loan.

The brokerage will happily give you the margin loan because it’s a secured loan.

Do not borrow to much of course. or you might end up with a Margin call.

A margin call is when your assets goes down in value so much that then the brokerage demand that the investor deposit more money or security to cover for any possible losses.

Secured Loan

A secured loan is when you put something as collateral just in case you can’t repay the load. In this case the collateral is your investment money or your assets.

You can use the borrow money to invest more so your investment grow more.

or

You can use the borrow money as emergency when you need money for something else. That way you don’t touch your assets and they can keep growing.

When use in the right way, margin loan are amazing.

Because is a secured loan, there is no application or credit check, There is no hassle. The margin rate or the interest rate that you pay back to the brokerage for taking the loan could be really low.

Just in case you missed the point

If you take a $100 loan at 3% interest rate then you owe 3 dollars to the brokerage. But if you take does $100 and invest it, if you rate of return is 8% then you made 8 dollars.

Now, you do the math, 8-3 = 5

So, you made a $5 dollars profits with someone else money.

You are using other’s people money to make more money.

That’s why in order to be wealthy you ought to use leverage.

No taxes on loans

This is something that you ought to pay attention to.

There is no taxes on any loans. You see, Loans are not income. Loans are not consider taxable income.

Because loans are not consider taxable income, you do not have to report them on your income tax.

If something were to happens to you, your love ones will be taken care off.

You might get to live to 120 years or your journey my end abruptly today. We don’t know how long we are going to be on this journey call life.

If something where to happens and your journey ends. There is no inheritance tax, so the money will be pass to our love one tax free.

Of course that before that happens, your estate will work with the brokerage and pay up any of the loans you took. Remember it was a secured loan.

That’s it.

Take a calculated risk.

Now, start and adjust as you go.