A Plus Account (Margin) allows you to trade without limits as long as you have available Buying Power. Additionally, it offers the option to use funds borrowed from the broker to purchase more assets or withdraw cash without selling your current positions. Please note that using margin is entirely optional.
Many clients maintain Plus Accounts to access its various benefits without necessarily using borrowed funds. Margin is a form of financial leverage, where you use a portion of your own capital as collateral to access a larger amount.
Key Benefits of Plus Accounts
- Personal Loans: Borrow funds for personal use (travel, education, emergencies, debt, etc.).
- Increased Capital: Invest more by combining your own capital with borrowed funds.
- Instant Settlement: When selling stocks, funds are credited immediately to your account for reinvestment, rather than waiting for the standard settlement period.
- No Setup Fees: Opening a Plus account is free of charge.
- No Time Limit: The loan does not have a fixed repayment date.
Note: Per U.S. regulations, an individual may only hold one (1) Plus (Margin) account. If you have multiple Self-Investing Accounts, only one can be a Plus account. There is no limit on the number of Basic (Cash) accounts per client.
Leverage & Interest
There is no cost to maintain a Plus Account. You only pay interest if you utilize the loan. Interest is calculated daily based on the amount used.
- Example: If you use $1,000 of the loan at a 13% annual interest rate (approximately 0.03611% daily), your interest would be roughly $0.36 per day, or about $10.83 per month. Accrued interest is charged to your account on the 15th of each month.
- Duration: The loan is open-ended. To stop using it, you can simply deposit funds or sell positions.
How to Use the Loan
To access margin, your account must maintain a minimum equity of $2,000. Using the loan is not mandatory; it is simply a tool at your disposal. You will begin using the loan automatically once you have invested all your available cash. We update your account values in real-time to reflect your current availability or borrowed amount.
Am I Using the Loan?
To use leverage, you must first exhaust your own funds. You can monitor this in the "Cash" field of your account:
- Positive Value: You are not using borrowed funds and have your own cash available to invest.
- Negative Value: This represents the specific amount of the loan you are currently utilizing.
How to Stop Using Margin
If you are using borrowed funds from Folionet, you have two options to stop:
- Deposit Funds: Transfer funds from your bank account. The loan balance will decrease by the amount deposited.
- Sell Positions: Sell assets within your portfolio. The loan will be reduced by the total amount of the sales (including commissions). These methods are not mutually exclusive; you can combine both to clear your balance.
Benefits & Risks
Using margin increases your sensitivity to changes in your account balance, which involves both opportunities and risks.
Benefits:
- Higher Buying Power: Access more investment opportunities.
- Higher Return Potential: If the asset's value rises, your gains are amplified.
- Flexibility: Seize market movements without waiting for additional capital.
Risks:
- Greater Exposure: If the asset's value drops, losses are also amplified.
- Interest Costs: Borrowed money incurs interest charges billed monthly on the 15th. Interest rates may change without notice.
- Margin Call: If your portfolio value drops significantly, our clearing firm may require you to deposit more funds to maintain your positions. If no action is taken, positions may be automatically liquidated to reduce the outstanding loan.
