I’ve been waiting for a few months now for some great companies to come down to fair value or better. At least what I consider fair value. While I wait, I’ve got some cash ready in case the stocks I am watching hit prices I want. In fact, I have placed some Good-Til-Canceled orders for five or six different stocks, just so I am not constantly watching whatever the market is doing.
However, the money that I am ready to buy stocks with is currently earning only 0.01% interest in Vanguard’s money market account. Ally Online Savings is yielding 0.5%, or fifty times better. While I want to earn more interest while I wait, I don’t want to miss any opportunities. There is no guarantee that stocks will stay down for the two or three days that transfers take. So it occurred to me to call Vanguard and see if I can open a margin account. That way I always have the credit I need to buy stocks when they go on sale, and I can pay off the margin loan in just a few days.
Vanguard said they could do what I want, but there is a built-in 50% margin for the account! What? Is it that easy? Apparently so. I can buy stocks worth up to 50% of the account at any time, for free, as long as I send a wire to the account with the missing money within four days.
That is a nice hack that I didn’t know about. Now I’ll earn 50 times more while I wait for stocks to go on sale. Hopefully even more if the fed ever actually raises interest rates.