Should I Get a Loan Against My Stock Portfolio in a Down-Trending Market?

One of the questions we often get here at A. B. Nicholas is “If the market is trending downward, does it make sense to obtain a loan against my stock portfolio instead of selling it outright?” Because of the myriad different combinations of securities in any given portfolio, and many other factors both business and personal that can affect any answer to this question, we need to be cautious. But even while being careful, we can indeed make some firm statements on the wisdom of a program like the A. B. Nicholas LeverageLine that we offer here.

The first cardinal fact is that when evaluating the alternatives, there are but two: Sell or Hold. If one Holds, the possibility — if you feel the market is heading down — of your securities portfolio losing more value does in fact exist. Here you may turn to a professional licensed advisor to go over the pros and cons of each of the constituent shares making up your portfolio. Or you may simply use your own method of reading into your stocks’ futures via your own crystal ball.

But one thing that can be said is that once sold, they are sold. You know longer will participate in any rebound in price should it occur later. Yes, you can buy shares back, but chances are that if you were to want them back, it would only be after they have begun (at least) to turn upward again, meaning you’ll suffer a cash loss having to re-buy at a higher price than what you owned/sold them for earlier. If the stock was in your estimation not worth holding, perhaps selling is a relief, and good riddance.

In a down-trending market, one would not normally expect a taxable capital gains event but of course that is certainly possible as well, particularly considering the strong gains o 2016 to mid 2018. Selling in a downward trending market for these shareholders is in their view much like jumping off a speeding train before it crashes. They are willing to take the pain of the capital gains hit in order to move into something more stable — or wait on the sidelines until things calm down. This is actually a more common scenario than has been the case in the past, as President Trump refuses to budge on China trade until the Chinese come to the negotiating table. The worries of some investors and the computerized trading systems that often kick in have meant a wild ride in 2018 for most.

So of course it can make sense, particularly if as an investor you believe the market’s forecast is negative, to sell, even if you must either sacrifice future upside or endure a loss to “get off the train.” But if these consequences are too unpalatable, a LeverageLine from A. B. Nicholas can be a perfectly smart alternative.

Why? Simple: We’ve honed down our stock loan model over the years to include maximum licensing, safety and security, with minimum constraints on client freedom to move in any direction they wish. An individual with a LeverageLine may exit any time. Strong maintenance and good client relationships ensure that any issues with dropping collateral value are dealt with in a way that meets the preferences of our clients, not an unyielding axe that offers no alternative solutions.

In short, we’ve crafted this excellent securities-based line through our partnership with a major public licensed U. S. banking and brokerage giant to be a specialized product designed for our A. B. Nicholas clients exclusively. We’ve carefully selected your executive institutional advisors, who will manage your loan and do so at no cost beyond the interest you pay on whatever you choose to draw from your line. We’ve cut all lender-side mandatory costs to zero. We’ve demanded — and received — speedy processing and discounted wholesale interest rates for our clients to save our clients money.

And while no one can either predict nor halt the movement of any stock price, we’ve demanded and received assurances that every portfolio will be rigorously analyzed and loan-to-values set conservatively to reduce the likelihood of needing to pay down the line or restructuring the portfolio to shore up value. Unlike margin loans in a falling market, LeverageLine is designed from the ground up to provide multiple client-friendly options no matter what occurs.

Get your free quote today. There is no obligation, and all you need is a recent brokerage statement and a copy of your driver’s license. We’ll do the rest, and you’ll get to see our A. B. Nicholas team in action with a great offer and all the exceptional security and customer service every one of our clients deserves.

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