Buying stocks on Margin

Q&A
1

Hi Evan,

How does one account for stocks bought on Margin?

Is there a way to keep track of them?

I suppose XIRR of stocks on margin would naturally differ from XIRR of stocks fully paid for with cash.

Thank you.

2

Hi there,

Thank you for reaching out. Honestly, I do not have a good answer for this :frowning:

The best we have so far is this discussion with kpo → https://stocks.cafe/friend/viewissue?issue_id=2166

Let me know if you have any suggestions/thoughts.

Cheers,
Evan

3

Hi Evan, thanks for the link, I’ve read it.

Here are my thoughts:

  • Add a field in Transactions for Margin Amount

  • Add a field in Transactions for Margin Interest %

  • When user deposits cash in brokerage account, Margin Amount will naturally fall. User must then edit Margin Amount as appropriate, and enter effective date of change. From effective date, Margin Interest calculation will be based new Margin Amount

  • Brokerage may adjust Margin Interest %. Similarly, enable user to edit Margin Interest % and enter effective date of change.

  • Add a new column (Net Value) in Portfolio view for that stock. Net Value of Stock = Value - Margin Amount

  • To not confuse majority of users who don’t trade on margin, Net Value should be disabled by default

  • XIRR calculations will treat:
    (a) Margin Interest (accrued daily) as cash outflows; and
    (b) Net Value as ending balance, because the Margin Amount is owed to the brokerage

Happy to hear what you think.
Thanks.

4

Hi,

Thank you for the ideas. They seems quite involved (Too many steps for both users and me to implement).

Anyway, can you add these to the ticket to see what kpo thoughts are?

Thanks,
Evan