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Setting up the Brokerage Account When Borrowing to Invest

If you borrow to invest, set up a separate brokerage account to hold the investments that you purchase with the borrowed funds (the leveraged investments).

This is the only way to ensure a clear paper trail to the borrowed funds, and will save you a lot of record keeping.  This is necessary even if you already have a margin account with a brokerage, and you want to use the margin being provided by stocks you have in the other account.  The brokerage can link the accounts so that they use a combined margin, and the stocks purchased on margin can be kept in a separate account.

Previous Borrow to Invest Article:

Methods of borrowing

Next Borrow to Invest Articles:

Buying the stocks and ETFs

What to do with the dividends

Selling the stocks and ETFs

Tax Tip:  Keep your leveraged investments in a separate brokerage account from your non-leveraged investments, to ensure a clear paper trail for interest deductibility.

Revised: October 26, 2023

 

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