Skip to main content
This Board Has Moved

This board has been migrated to our new platform! Check out the new home page at or click below to go directly to the new Board on the new site.

Go to the New Site
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Here's how I explained it in our newspaper feature (to mearn more about our feature and how to help get it in your local paper:

Q. How does buying stocks on margin work?

A. Buying on margin means you're borrowing money from your brokerage firm and using it to buy stocks. It's attractive because you can turn a profit using money that you don't even have. For that privilege, you're paying interest to the brokerage, just like with other loans. (Actually, it's a lot easier to open a margin account than to apply for a bank loan.) If the market turns against you, you either sell for a loss -- plus interest costs -- or hold on until the market picks up, paying interest all the while. Fools borrowing on margin and paying 9% interest should be pretty sure their stocks will appreciate more than 9%. If your margined securities fall below a certain level, you'll receive a "margin call," requiring an infusion of additional cash.

Only experienced investors should use margin. And although you're currently allowed to borrow up to 50% of what your actual holdings are worth, many Fools think that 20% is the most you should borrow, if you borrow at all. You might remember some kind of market decline around 1929. Well, that was partly due to people buying too much on margin. The required collateral was a mere 10%, then, not 50%, so things are considerably more controlled now.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.