A popular meme category is “Expectation vs. Reality”. Well, I just experienced my own version when I looked at my monthly report from my Fidelity Investments securities lending activities, where I lend out my stock shares and get paid interest. I had been getting a lot of transaction notifications where all my shares of Paramount (PARA) were being lend out to somebody (most likely to short it).
Expectation. I previously wrote about in general, including that from Fidelity. In December 2021, Fidelity was showing this as an example scenario:
As of March 2023, the example scenario on the shows a significantly lower income rate:
Still, over $400 a month of extra income from a $100,000 balance? I have a six-figure taxable Fidelity account, so I figured I was leaving money on the table! Let’s go!
Reality. Out of all my stock holdings, the only one to garner any lending interest was Paramount. This mostly makes sense in retrospect, as I tend to buy larger, high-quality companies when they are temporarily out of fashion. You don’t really see a lot of people shorting Berkshire Hathaway. Paramount is more of a value/cheap P/E and/or dividend play. (Although, Berkshire does own 10% or so of Paramount…)
Here are my real-world stats on Paramount:
Shares on loan: 582
Market price: ~$23
Market value: ~$13,386
Annualized lending interest rate: 0.25%
Daily accrual: ~$0.10 a day.
Monthly pro-rated income: $2.79
Actual income: $1.91 (only borrowed for 19 days)
So… basically I was making 10 cents a day lending out my $13,000 of Paramount shares. At that rate, even if I had $100,000 worth of Paramount, I’d be making roughly 77 cents a day, or $23 a month. Nowhere near the $479 a month example. Ah well, at least I bought into PARA at $17.22 a share.
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