Securities Lending Quick and Easy
A popular misconception of a financially secure investor is that he has large
amounts of spendable money at his disposal. This is often not true due to the very
thing that makes him financially secure. Investments in the stock market take a lot
of money and often use much of an investor`s funds.
Sudden financial needs may arise in which the investor needs liquid funds. When this occurs, he is left with two options: sell some stocks or take out a stock loan. As long as the investor`s portfolio is sufficiently diversified and his investments stable, taking out a stock loan is the far better option. Instead of missing out on potential appreciation by selling stocks too early or taking a loss by selling at a time when stocks have taken a temporary dip, the investor can take out a loan to address pressing financial matters and pay it back at a later time using the profits from the retained stocks or from other sources.
Even if the investor`s stocks remain stagnant over the course of the loan and he is not able to pay it back with profits by the end of the loan agreement, he can still sell some of his stocks to pay back the stock loan. This leaves him in the position he would have been in had he sold them to gain liquid funds in the first place. Like anything in finance, securities lending are a calculated risk, but with the bonus of providing short term liquid assets without disrupting long term financial gains.