Margin loan balances at Charles Schwab swelled to nearly $190 billion in the third quarter, a jump driven largely by the growth of one tax-loss harvesting strategy.
Tax-loss harvesting involves selling investments that have declined in value to realize losses, which can offset capital gains and reduce an investor's tax bill. Investors often use margin loans to maintain their market exposure while executing these sales, borrowing against their existing portfolios to buy back similar positions shortly afterward.
The surge in margin borrowing at Schwab reflects broader appetite for leverage across Wall Street. Brokerages have seen clients increasingly willing to borrow to finance investments, a trend that can amplify both gains and losses when markets turn volatile.
Analysts watching the figures see the strategy as a sign of how tax considerations are shaping investor behavior. The third-quarter rise in borrowing highlights how tax planning and credit activity are becoming increasingly intertwined on Wall Street.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing