Request loans using our investment portfolios

Today we continue with asset management. Let's imagine we need liquidity to cover a major expense, but we don't have the necessary money. However, we do have an existing investment portfolio: stocks, bonds, and mutual funds. One option in this case would be to pledge the stocks, that is, leave them as collateral to obtain financing.

To give a clear example: instead of the home being the collateral, as with a mortgage, here it's the portfolio itself. With this instrument, we obtain liquidity through a loan with a lower interest rate than a traditional personal loan. Let's recall what we said last week: If the return on capital is higher than the cost of borrowing, why should we undercapitalize?

In return, the bank may limit the transactions we make with the portfolio for the duration of the loan. This will only affect us if we directly manage our shares. On the other hand, if we have an investment fund, since we don't execute the orders ourselves, it practically doesn't affect us.

This option has several advantages. From a tax perspective, we won't pay taxes until we liquidate the investment. If the portfolio is in losses, we gain time to recover them; and if it's profitable, we have time to let them grow. However, we must be careful: if the portfolio falls below a threshold set by the bank, the bank may require more collateral or liquidate part of the positions to cover its risk.

In any case, pledging portfolios, despite the advantages it offers, is a risky product that is only recommended for investors with sufficient knowledge of the financial markets.