club_cafe: Margin Account

juan.mostek on

MAGIC Investment Club has had a margin account with Harris Direct since 1996. Our results have been outstanding as we have 'managed' margin purchases by paying off the balance in a short period of time. Using margin is no different than using a VISA card to pay for a dinner. AS long as the club understand the risks associated with margin, and as long as there is a well defined margin strategy, the club can leverage buying opportunities, and better manage cash flow.

J Mostek

-----Original Message-----
From: IraS1@aol.com [mailto:IraS1@aol.com]
Sent: Tuesday, November 04, 2003 6:49 PM
To: club_cafe@bivio.com
Subject: Re: club_cafe: Margin Account

Ellen,

There are two disadvantages. The first is that having a margin account means you can write checks (or buy stocks) for more than your balance in the account. You have an overdraft line of credit. If you should use the credit line each and every partner would be personally liable for repaying the debt. In the normal course of events, that might not be a problem, but do you want to create an opportunity for someone to take advantage?

Second, most investment club partnership agreements prohibit the club from taking on debt (mainly to protect against the sort of problem outlined above). That means you can't open a margin account without amending your agreement.

Ira Smilovitz

In a message dated 11/04/03 6:32:57 PM Eastern Standard Time, failteg@bivio.com writes:

We have recently been switched from Mydiscountbroker to
Ameritrade. When I requested checks for the Ameritrade
account, I was told I had to apply for a Margin Account in
order to have check writing privileges.

Could someone tell me if there are any *disadvantages* to
opening up a Margin Account? I just don't understand why
this is necessary just to get a checkbook!

Thank you for your help in this regard.

Ellen

Ellen Gilmartin on

Thank you Ira and Juan. All I want is *Check Writing
Privileges*!

Ellen
**********************

juan.mostek@kellogg.com wrote:
> MAGIC Investment Club has had a margin
> account with Harris Direct since 1996. Our results have been outstanding as we
> have 'managed'� margin purchases by paying off the balance in a short
> period of time. Using margin is no different than using a VISA card to pay for a
> dinner. AS long as the club understand the risks associated with margin, and as
> long as there is a well defined margin strategy, the club can leverage buying
> opportunities, and better manage cash flow.
> �
> J Mostek
> �
> �
>
> -Original Message-----
> From: IraS1@aol.com
> [mailto:IraS1@aol.com]
> Sent: Tuesday, November 04, 2003 6:49
> PM
> To: club_cafe@bivio.com
> Subject: Re: club_cafe: Margin
> Account
>
>
>
> Ellen,
> �
> There are two disadvantages. The first is that having a margin account
> means you can write checks (or buy stocks) for more than your balance in the
> account. You have an overdraft line of credit. If you should use the credit
> line each and every partner would be personally liable for repaying the debt.
> In the normal course of events, that might not be a problem, but do you want
> to create an opportunity for someone to take advantage?
> �
> Second, most investment club partnership agreements prohibit the club
> from taking on debt (mainly to protect against the sort of problem outlined
> above). That means you can't open a margin account without amending your
> agreement.
> �
> Ira Smilovitz
> �
> In a message dated 11/04/03 6:32:57 PM Eastern Standard Time,
> failteg@bivio.com writes:
> We have recently been switched from Mydiscountbroker
> to
> Ameritrade.� When I requested checks for the
> Ameritrade
> account, I was told I had to apply for a Margin Account
> in
> order to have check writing privileges.
>
> Could someone tell me
> if there are any *disadvantages* to
> opening up a Margin
> Account?�� I just don't understand why
> this is necessary just
> to get a checkbook!
>
> Thank you for your help in this
> regard.
>
> Ellen
>

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