client benefits

Investing on margin

When you invest on margin, you borrow either cash or securities from your broker to complete investment transactions.

What's required for margin accounts

You're usually required to come up with just a percentage of the amount needed for a securities purchase or short sale while paying interest to finance the rest based on an approved line of credit.

This allows you to increase your "buying power"—the amount of money available in your account to purchase marginable securities. For example, if you have $50,000 in your money market settlement fund, your buying power is actually $100,000, because you're required to deposit just 50% when buying or selling short* most marginable securities.

To keep your line of credit open, you must maintain a certain amount of equity—the current value of your assets less the amount of the margin loan—in your account at all times. Margin trading can increase your return on an investment, but there's also the potential for significant loss. At Vanguard Brokerage, margin investing is allowed only with our prior approval for nonretirement brokerage accounts. It's not permitted for retirement accounts, UGMA/UTMA accounts, and certain other types of accounts.

You can't just trade any type of security you want on margin. The Federal Reserve Board (FRB) determines which securities can be margined. These include:

Vanguard Brokerage margin rate interest schedule

When money is borrowed in a margin account, interest will be calculated on a daily basis and charged based on the total debit (borrowed) balance. The monthly interest period begins two business days before the beginning of each month and ends three business days before the following month's end.

As of March 6th, 2020, Vanguard Brokerage's base lending rate and interest rates are as shown below. The effective rate, or true interest rate, charged on loan balances is the base lending rate plus the interest rate. If the rate of interest charged to you increases for any reason other than a change in the base lending rate, you will be notified at least 30 days in advance.

Current interest rate schedule

Loan balance Interest rate Effective rate (includes 6.0-0% base rate)
Up to $19,000 2.50% 8.50%
$20,000–$49,999 2.00% 8.00%
$50,000–$99,999 1.50% 7.50%
$100,000–$249,999 1.00% 7.00%
$250,000–$499,999 0.50% 6.50%
$500,000–$999,999 –0.75% 5.25%
$1 million or more –1.25% 4.75%

Want to learn more?


Need to open a brokerage account?

Open your account online

 

Need to open a margin account?

Complete a Margin Account Application

 

 


*Trading limits, fund expenses, and minimum investments may apply. See the Vanguard Brokerage Services commission and fee schedules for full details.

For additional information about margin investing, including the risks associated with it, read the Vanguard Brokerage Initial Margin Risk Disclosure Statement or visit the FINRA and U.S. Securities and Exchange Commission External site websites.

All investing is subject to risk, including the possible loss of the money you invest.