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Did I say mandatory? I meant optional! You're "free" to die in a cardboard box under a freeway as a market capitalist scarecrow warning to the other ants so they keep showing up to make us more!
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this post was submitted on 19 Sep 2024
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Ummm I didn't know they could be used as collateral. I'll have to research that. It doesn't sound right to me for the same reason they definitely should NOT be taxed. How does that even work? You buy stocks and you hold them, then, what the government taxes you every year until there ARE no gains. Or perhaps the stock plummeted and you have a loss, but it's ok, you lost money on the investment AND to the government. Until you sell an investment you haven't made any money on it and it should NOT be taxed. If you have a 401k this would affect you too, not just rich people.
Ultra net worth individuals, especially ones like Jeff Bezos with a lot of his net worth tied up in one company, can take a personal loan using his stock as collateral to keep up his lifestyle without needing to sell (and be taxed on) anything. It's only really available for the 1%
I've never made 6 figures before, but was asked to show my investment portfolio value when applying for a mortgage as it was part of my assets. Assets the bank could seize if I didn't pay my bill.
TIL I'm the 1%.
The poster you're replying to is talking about something else. There's a point where the terms you can get for loans using your stock portfolio as collateral are so good that you can count on your stock value growing faster than interest payments on the loan, enabling you to take out loans that amount to free money and live off of them (or use them on more investments that grow faster allowing you to take larger loans, etc).
Banks don't mind because they reliably get their interest payments, can count on settling the account when the person dies, and of course there's the social capital of being the institution that ultra wealthy people bank with. For an ultra-rich person it's how they can have the liquidity to live an ultra-rich lifestyle even if all of their wealth is tied up in the market.
I still think anyone can do that, just on a smaller scale. Either way, sounds risky. Stocks sometimes go down as it turns out.
TIL I can use my stock as collateral in a mortgage
That's strange. I've had a few mortgages now and have never been asked to show my investment portfolio. Where are you and what bank asked for the info?
Canada. All of the banks I applied at asked for total assets, including TD and Scotiabank.