[taway789aaa6]

Ah yes, the old "we'll buy stocks for you and then turn around and lend them out to short sellers that actively want you to lose money. Promise we care about you!"

I do not trust any institution that makes money off of lending MY shares out to predatory short-sellers who's sole purpose is to decrease the value of MY shares.

[ac29]

> lending MY shares out to predatory short-sellers who's sole purpose is to decrease the value of MY shares.

Sure, that is their goal. But, shorting equities is a tough game, because most years the market goes up. An investor who is broadly short the market would therefore lose money more often than not, and has to pay borrow fees on top of that.

If you hold shares that you think are going to go up, you absolutely should be willing to lend out your shares because it will enhance your return.

[gruez]

>I do not trust any institution that makes money off of lending MY shares out to predatory short-sellers who's sole purpose is to decrease the value of MY shares.

1. You realize that short sellers have to buy the stock back, which basically has the opposite effect? Unless you're planning to dump the stock in a few months, this isn't worth worrying about.

2. You know what's worse than short sellers driving down the price of your stocks? Corporate malfeasance going undetected and blowing up (eg. Enron), causing you to lose everything. Short sellers might get a lot of flak by profiting off people's losses, but they provide a useful service by exposing misconduct and putting a wet towel on irrational exuberance.

[ramon156]

Sorry if this sounds uninformed, but what is the alternative? Even the bank and pensions gamble with your money, its how they move. I wish it wasn't the case either

[taway789aaa6]

The alternative is to not fall for the "its basically free!" schtick.

If its free, then you're the product.

If its $1/month, then you're still probably the product. In the case of my investments, I do not want the firm that I invest with -- to whom I trust my assets -- to turn around and lend out my assets to other organizations that have no obligation to me to act in my best interest. Share lending is almost always to lend to short-sellers that are trying to decrease the price of the asset being borrowed.

> Even the bank and pensions gamble with your money, its how they move

I guess its not worth having an opinion that this is not a good thing then? Bring back Glass-Steagall to separate out banks and gamblers.

[semiquaver]

  > separate out banks and gamblers.

Banks are inherently in the business of gambling. Since time immemorial the defining characteristic of a bank is to convert short-term liabilities (deposits) to long-term assets (loans). To lend is to gamble that your borrower will pay you back. A bank that takes no risk cannot cover its expenses and will cease to exist.

[dmoy]

Vanguard doesn't make money off of short term lending.

They do it, but the proceeds go back to the individual funds (helps boost index tracking performance).

Fidelity and Schwab both take a cut. I forget beyond that, I guess IBKR does stuff.

[toast0]

Vanguard keeps sending me emails lately about enabling lending on my brokerage account[1]; although I only have classic mutual funds in there, which I don't think can be lent. I imagine their brokerage lending will include a cut for the brokerage, although maybe it will be closer to cost than at other brokerages. I don't really know where the Vanguard brokerage net revenue ends up.

[1] And frankly a lot of other 'opportunities' I'm not interested in, that seem outside the John Bogle model of Vanguard helping normal people invest in the public market at low cost. I don't want to invest in off market opportunities, thanks, and it makes me lower my opinion of the company that they push it.

[dmoy]

Most vanguard classical mutual funds are share classes of an underlying ETF, and can be lent.

Last I checked (which to be fair was like a year or so ago), vanguard didn't take a cut for securities lending. It does however boost the fund's performance

https://corporate.vanguard.com/content/corporatesite/us/en/c...

[toast0]

That page is from Vanguard the funds.

Vanguard the brokerage also has a share lending program, advertisement here https://investor.vanguard.com/campaign/earn-additional-incom...

> Vanguard Brokerage maintains an economic interest in Fully Paid Lending program loans and earns revenue in connection with such loans.

Vanguard the brokerage wants me to enable lending, but my mutual fund shares in Vanguard the brokerage can't be lent, because mutual funds are not lendable. If I converted it to an ETF, then the ETF could be lent, but I don't know how much interest there is in borrowing ETFs to short.

The underlying holdings in the mutual fund can be lent by Vanguard the funds. Vanguard says all the proceeds from lending (net of expenses) go to the funds. I think Schwab and Fidelity take a cut of lending proceeds on funds beyond their program expenses, but then they take a 'zero expense ratio'. It doesn't necessarily matter to me where specifically the Fund administrator takes their fees, it's the end of the day net investment value. And honestly, inertia is a big part of it, I have too much unrealized capital gains to really consider changing my stock funds, but I could be convinced to switch to a different brokerage.

[chii]

> Even the bank and pensions gamble with your money, its how they move. I wish it wasn't the case either

banks don't gamble with your deposit - that's illegal. They use your deposit as a form of security when they loan money out (it takes similar position as equity).

Pensions don't gamble, they buy investments which could have some risks (and it's calculated risks). These risks are such that they make a reasonable return for taking it, and therefore can service their obligations (as a pension fund).

[recursive]

So if the risk is calculated, it's not gambling? Lottery tickets publish their odds. And in that case, it's actually possible to be confident that the odds are correct. I don't understand.

[chii]

> Lottery tickets publish their odds.

"taking calculated risk" doesn't mean to calculate the risk. It means to look at whether the risk is worth taking, and only taking those that are worth.

Lottery is a bad risk - so it would be not wise to take lottery risk (as it's got a negative expectation of return).

[jprafael]

You can DRS (https://www.dtcc.com/asset-services/securities-processing/di...) your shares so that no one can lend them out from you. Some brokers have a setting (opt in or opt out) that disallows lending your shares (or that compensate you if they do).

[taway789aaa6]

This is the way.

[short_sells_poo]

The bigger issue is that it's basically just well hidden fees. You can add a decent amount of income to your portfolio by lending out the stocks to short sellers. Particularly in a market crash, the fees for borrowing stocks skyrocket (can easily be in high double digit %). Good firms allow you to lend out your stocks and give you the fees. Less good firms claim to give you a very cheap deal, but then basically shaft you by claiming these benefits for themselves.

If this business proposes to be profitable by harvesting the borrow fees, then them being cheap is really disingenuous because they give you with one hand and take from you with the other.