Margin Accounts & Investment Clubs

[Guest]

imported post

Hi all, if someone has time, could you please walk us through opening and using a margin account and any other info you have about margin accounts. My understanding of this is limited at this point. I'm going to be starting an investment club with 9 friends, putting in $500 each every 3 months. When we open our "partnership", can this be a margin account? Can you have a margin account not use it on margin all the time?

Also, I know for federal tax purposes I have to obtain an EIN, does anyone know the Maryland state requirements for starting an investment club? I believe I need to obtain something to "qualify" our club name or something to that effect. Can't remember the name of the form though.

Thanks for the help.

TT

 

[Rolo]

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An LLC is probably the easiest to form. Gooooogle for info on LLC's for your state; they vary slightly. Obtaining an EIN is from the IRS...you can probably get the form from irs.gov.

Gooooogle info on investing on margin and go to your brokerage's site (i.e. Scottrade) and understand their terms for margin accounts. Know the rules and observe how it plays out; margin calls and fed calls do not play out quite the way you may think on paper. Learn from examples.

Just because you have margin does not mean you have to use it; it is totally liquid.

 

[Spaf]

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tsptorture wrote:

Hi all, if someone has time, could you please walk us through opening and using a margin account and any other info you have about margin accounts.
TT

Margins enable you to borrow certain amounts of money using cash or securities already in the account as collateral.

Because you are buying on credit each respective brokerage firm generally has its own screening procedure. The Federal Reserve requires a $2,000 min. deposit. The limit you can borrow is 50% of the initial purchase price.
Warning, this is somewhat risky.

Some trading options that you have can be found in Trading for Dummies. These are generall good starter books, because the authors arn't trying to sell something, and they give a lot of references, tips, and oh yes warnings.

Barchart.com has some great information research and listings for all sort of stuff. Check out the exchange traded funds, which can be sorted by gains and losses. their opinions and research takes a lot of the guess work out. Which leaves more time for other stuff.

I like the direct access brokers, they come in all sort of flavors,and lately they seem to be having a price war.

And, don't forget system platforms. For under $10 the folks at Vectorvest.com will let you try out their system for 5 weeks, free.

Things to consider, and god luck!

Rgds Spaf

 

[tsptalk]

imported post

When I started an investment club years ago, since disbanded,as novices we decided touse the Beardstown Ladies book as a guide. It had a lot of good info as does the NAIC (National Association of Investment Corporation). http://www.better-investing.org/ They should provide all the info you need.