Stock Lending Programs: Extra Income or Hidden Risks?

0:00Major brokerages like Fidelity and Schwab are pushing stock lending programs to everyday investors, promising extra income from shares that just sit in your account. You loan your stocks to the broker, who then rents them out to short sellers or hedge funds, and you get a cut of the fees, which range from zero, 0.3% to 3% of the stock's value. You keep ownership, can sell any time, and the broker posts cash collateral worth at least 100% of the shares value. Fidelity lets you join with just $25,000 in a brokerage account, including IRAs, and pays a variable rate based on demand, though. It doesn't spell out its revenue split. Schwab needs $100,000 in household assets, and shares revenue 50-50 with you, posting even more collateral at 102%. Both handle enrollment online, but earnings depend on your stocks. High demand ones pay more. For most buy-and-hold folks with index funds or blue chips, the income is tiny and won't

1:00move the needle as money experts point out. It shines for large portfolios, heavy and hard-to-barrel small cap or niche stocks, especially in tax-free Roth IRAs, where dividend tax glitches don't hurt. Watch for risks like losing SIPC protection, on loan shares, higher taxes on substitute dividend payments, and giving up voting rights to borrowers, taxable accounts with big dividend payers often see tax hits bigger than their earnings. If it fits your setup, review your holdings, read the agreements, and track monthly payouts against any tax costs. It's real income for the right. Investor, but skip it if the trade-offs don't add up. I'm Corey with the story, and you've been listening to Durham News today, AI-powered local news.