What to do when the stock market falls and there is no cash to react properly? Again, only securities in the depot, which slip down the B mitrsenkurve the bear down the hump? Unfortunately, the Bare was recently invested in a new car, and now it lacks painful, because the descent seems to have arrived at the bottom.
Clever financial heads have come up with the securities loan for such cases.
The securities loan can be used in two forms.
1. Money is being used to buy securities, just as in the example above. Then the acquired pieces are considered a pledge for the loan. Or
2. Money is lent against securities held in the securities account. It does not matter if you buy shares or airline tickets in the south.
The loan for acquiring securities against pledging this is also referred to as Lombardkredit.
In principle, the securities or Lombard loan is just a loan like any other. For a security money is made available, which is usually repaid in monthly installments. The difference here is simply that securities offer that certainty. In that way, your own money will actually be lent – in other words, you could finally lock the stocks out of the securities account – the securities loan is often available on friendly terms. On top of that, the fees for the provision and administration sometimes fall flat, and the money is quite fast at the free disposal on the account.
However, as this may look like in practice, the following example explains:
Your deposit makes a good impression, because it contains securities worth 50,000 euros. This will allow the bank to bribe a bit to ease some bills and, in fact, accept the deposit as collateral. However, the credit line will not be 50,000 euros. 50% of the total, this can be talked about des because of the risk of price fluctuations. If that was not enough for the investor, he would have to increase his deposit to 100,000 euros.
The assumption that the DAX does not crash farther away, but turns out to be hallucination. Now it’s time to get down to the basement and the price is halved. Suddenly, for a € 50,000 loan, only € 50,000 is still available as collateral. Now it goes down even further, and the depot is only 37,500. Since banks are, as we know, so sensitive, the credit institution requires at short notice and then just 12,500 euros, so you can sleep there again. However, if the investor is naked, his securities must serve this amount. If the curve continues to brittle, it gets worse. The more volatile the deposits, the riskier the whole affair, and the laughter dies down quickly.
What do we mean by that? Well, some people who bought stocks on stock, or even gave their securities as collateral for lending money, later often fell in love with psychiatric treatment when the price quarreled. Credit-financed exposures should be kept within a tight range because of the many times higher risks involved.