Investor Glossary-buying on marginInvestor Glossary-buying on marginInvestor Glossary-buying on marginInvestor Glossary-buying on marginInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Buying On Margin

The HTML to link to this page
 

When investors engage in buying on margin, they borrow money to purchase securities. The first step in buying on margin is to set up a margin account. Investors can borrow up to half the cost of securities while buying on margin. Because brokerages have different rules for buying on margin, investors must pay close attention to margin account agreements. Because of interest payments, buying on margin is typically a short-term technique. While buying on margin, investors must track prices. If margin account equity falls below a pre-set level (i.e. maintenance margin level), a brokerage will issue a margin call. The investor then must liquidate the stock or add cash to the margin account. IPOs and stocks priced below $5 are not securities for which buying on margin is possible. Most retirement accounts do not allow buying on margin. That is because buying on margin can amplify investment returns, but the technique can also create losses greater than the initial investment.



Rate this buying on margin definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: ex-dividend, debt service coverage, required rate of return, annual return, FTSE, margin rate, 1035 exchange, Key Rate Duration, FICO score, inflation, quality assurance, option premium, 1031 exchange, current ratio, minority interest, wholly-owned subsidiary, average price per share, phantom income, VIX, EBITDA, in escrow, risk management, diluted share, deferred tax, ex-dividend date, reverse mortgage, deferred revenue, cancelled check, real GDP, per diem, command economy, stock split, stock market close, Zero Cost Collar, dividends payable, class C shares, retained earnings, balance sheet, labor relations, liquidity ratio, APR, 144a, open position, covered put, implied volatility, limit order, 401a, LIBOR, irrevocable trust


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use