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.
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.
> separate out banks and gamblers.
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.
[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.
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).
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.
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.
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.