Hi all,
I am planning to implement the LifeCycle Investment strategy and I decided to use margin loan and box spread to achieve the desired leverage to increase tax efficiency. I will probably borrow money to buy VOO in a portfolio margin account. Now, I am trying to decide brokerage firms between Interactive Broker (IBKR) and Fidelity.
IBKR
* Cheap margin BM+1.5%. You probably do not do even box spread for loan < 100K.
* No money market auto sweep. You need to avoid have cash left or need to use MM ETF for excessive cash.
* Outgoing transfer is limited. ACH pull (for credit card payment) needs confirmation and is not reliable. This means I would keep ~10K cash as a buffer in a Fidelity account for receiving salary and paying credit card, which increases the complexity and cost (2% interests spread between IBKR loan and SPAXX interests plus tax difference (box loan is 40/60, while SPAXX is 100%), which total 2.5% per year after tax).
* Commission is high, bad small order: $0.35 minimal for each equity trade and $5 total for each box spread.
Fidelity
* Very Expensive margin rate (>10%), so you never use margin loan and always keep cash by sell box spread before new any stock.
* Excessive cash will be automatically swept into SPAXX. However, you lose 0.7% of spread between box loan and SPAXX plus tax difference, which total around 1.2% of the cash value.
* Use Fidelity as a bank is great. One account for everything.
* Commission is low, so good for small order. $2.6 total for each box spread.
Now I am leaning toward IBKR (margin loan + box + stock) + Fidelity (cash) since it is easier to manage (but maybe more expensive). For Fidelity-only solution, it is hard to buy 10K stock because box spread is normally around 100K and is not very liquid.
I am planning to implement the LifeCycle Investment strategy and I decided to use margin loan and box spread to achieve the desired leverage to increase tax efficiency. I will probably borrow money to buy VOO in a portfolio margin account. Now, I am trying to decide brokerage firms between Interactive Broker (IBKR) and Fidelity.
IBKR
* Cheap margin BM+1.5%. You probably do not do even box spread for loan < 100K.
* No money market auto sweep. You need to avoid have cash left or need to use MM ETF for excessive cash.
* Outgoing transfer is limited. ACH pull (for credit card payment) needs confirmation and is not reliable. This means I would keep ~10K cash as a buffer in a Fidelity account for receiving salary and paying credit card, which increases the complexity and cost (2% interests spread between IBKR loan and SPAXX interests plus tax difference (box loan is 40/60, while SPAXX is 100%), which total 2.5% per year after tax).
* Commission is high, bad small order: $0.35 minimal for each equity trade and $5 total for each box spread.
Fidelity
* Very Expensive margin rate (>10%), so you never use margin loan and always keep cash by sell box spread before new any stock.
* Excessive cash will be automatically swept into SPAXX. However, you lose 0.7% of spread between box loan and SPAXX plus tax difference, which total around 1.2% of the cash value.
* Use Fidelity as a bank is great. One account for everything.
* Commission is low, so good for small order. $2.6 total for each box spread.
Now I am leaning toward IBKR (margin loan + box + stock) + Fidelity (cash) since it is easier to manage (but maybe more expensive). For Fidelity-only solution, it is hard to buy 10K stock because box spread is normally around 100K and is not very liquid.
Statistics: Posted by zhou13 — Thu Apr 25, 2024 3:15 pm — Replies 0 — Views 57