Anyone using Limited Margin at Schwab (IRA)?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
nalor511
Posts: 5058
Joined: Mon Jul 27, 2015 1:00 am

Anyone using Limited Margin at Schwab (IRA)?

Post by nalor511 »

Hey Folks,

I'm interested in Limited Margin in my IRA so I can get out of some legacy MF shares that I naively transferred into Schwab, and I was just wondering if anyone here uses it, if you've encountered any gotchas, etc.

They want me to fill out a paper form, which I'm loathe to do just to try this feature out, but love to hear your experiences on whether it's worth the effort. Thanks!
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by 000 »

Might this be a case to use leveraged ETFs to temporarily increase exposure while cash is settling?
sc9182
Posts: 2178
Joined: Wed Aug 17, 2016 7:43 pm

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by sc9182 »

000 wrote: Mon Nov 29, 2021 9:57 pm Might this be a case to use leveraged ETFs to temporarily increase exposure while cash is settling?
Hehe - you still need some upfront cash to buy 2x or 3x products :-)

Never been much of a fan for MFs - for their Dividends/CG leak (I know VG mostly minimizes these). We’ve been mostly ETF buyers/holders over 15+ years. ETFs have limited CG/Dividends— and easier to port (between Brokerages). Also, lot easier for securities lending and for accessing margin (hardly recommend it, nor using margin though !!)
User avatar
Wiggums
Posts: 7050
Joined: Thu Jan 31, 2019 7:02 am

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by Wiggums »

nalor511 wrote: Mon Nov 22, 2021 1:08 pm Hey Folks,

I'm interested in Limited Margin in my IRA so I can get out of some legacy MF shares that I naively transferred into Schwab, and I was just wondering if anyone here uses it, if you've encountered any gotchas, etc.

They want me to fill out a paper form, which I'm loathe to do just to try this feature out, but love to hear your experiences on whether it's worth the effort. Thanks!
Here is a guide from Schwab on margin.
https://www.schwab.com/public/file/P-4193744

I’m not sure what your hesitation is about the margin paperwork. The real question is whether the leverage will pay off which is impossible to know. The margin cost is definitely a drag on the account performance.
"I started with nothing and I still have most of it left."
User avatar
calmaniac
Posts: 1325
Joined: Fri Jan 30, 2015 2:32 pm

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by calmaniac »

nalor511 wrote: Mon Nov 22, 2021 1:08 pm Hey Folks,

I'm interested in Limited Margin in my IRA so I can get out of some legacy MF shares that I naively transferred into Schwab,
---SNIP---

How will using margin allow you to get out of legacy mutual funds? I don't understand the connection. What am I missing?
"Pretired", working 20 h/wk. AA 75/25: 30% TSM, 19% value (VFVA/AVUV), 18% Int'l LC, 8% emerging, 25% GFund/VBTLX. Military pension ≈60% of expenses. Pension+SS@age 70 ≈100% of expenses.
User avatar
Watty
Posts: 28859
Joined: Wed Oct 10, 2007 3:55 pm

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by Watty »

nalor511 wrote: Mon Nov 22, 2021 1:08 pm I'm interested in Limited Margin in my IRA so I can get out of some legacy MF shares that I naively transferred into Schwab, and I was just wondering if anyone here uses it, if you've encountered any gotchas, etc.
What is "MF" and why would you need margin to sell them?
Topic Author
nalor511
Posts: 5058
Joined: Mon Jul 27, 2015 1:00 am

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by nalor511 »

calmaniac wrote: Tue Nov 30, 2021 9:11 am
nalor511 wrote: Mon Nov 22, 2021 1:08 pm Hey Folks,

I'm interested in Limited Margin in my IRA so I can get out of some legacy MF shares that I naively transferred into Schwab,
---SNIP---

How will using margin allow you to get out of legacy mutual funds? I don't understand the connection. What am I missing?
I perhaps should have specified - without being out of the market for a day
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by 000 »

sc9182 wrote: Mon Nov 29, 2021 10:12 pm Hehe - you still need some upfront cash to buy 2x or 3x products :-)
I was thinking if the OP had anything else in their account that would settle within T+2.

Actually, wouldn't a MF sell settle within T+2, in time for the ETF buy (as long as you didn't overshoot), or would it take longer for external MFs? Or does Schwab not let you trade with unsettled funds like that?
Topic Author
nalor511
Posts: 5058
Joined: Mon Jul 27, 2015 1:00 am

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by nalor511 »

000 wrote: Tue Nov 30, 2021 3:50 pm
sc9182 wrote: Mon Nov 29, 2021 10:12 pm Hehe - you still need some upfront cash to buy 2x or 3x products :-)
I was thinking if the OP had anything else in their account that would settle within T+2.

Actually, wouldn't a MF sell settle within T+2, in time for the ETF buy (as long as you didn't overshoot), or would it take longer for external MFs? Or does Schwab not let you trade with unsettled funds like that?
I have not been able to trade with unsettled funds thus far, I placed a test MF sale and my unsettled funds balance did not increase
exodusNH
Posts: 10344
Joined: Wed Jan 06, 2021 7:21 pm

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by exodusNH »

nalor511 wrote: Tue Nov 30, 2021 3:54 pm
000 wrote: Tue Nov 30, 2021 3:50 pm
sc9182 wrote: Mon Nov 29, 2021 10:12 pm Hehe - you still need some upfront cash to buy 2x or 3x products :-)
I was thinking if the OP had anything else in their account that would settle within T+2.

Actually, wouldn't a MF sell settle within T+2, in time for the ETF buy (as long as you didn't overshoot), or would it take longer for external MFs? Or does Schwab not let you trade with unsettled funds like that?
I have not been able to trade with unsettled funds thus far, I placed a test MF sale and my unsettled funds balance did not increase
Are there fees for selling the mutual fund? If not, why not pick a number, e.g., $1000, transfer that amount of cash in, and then sell $1000/day, using the cash to buy before it settles? This obviously isn't feasible if $1000 is a small amount of money compared to what you're trying to get out of.
Topic Author
nalor511
Posts: 5058
Joined: Mon Jul 27, 2015 1:00 am

Re: Anyone using Limited Margin at Schwab (IRA)?

Post by nalor511 »

In case anyone wondered, Limited Margin at Schwab does not work for transitioning from Mutual Fund to ETF without being out of the market. I placed a sell in dollars for$100MF and was unable to create a buy for $100ETF. Oh well.
Post Reply