Margin
Also called: buying on margin, margin account, Reg T
Buying on margin means borrowing money from your broker to buy more stock than your cash alone allows, using your investments as collateral.
Under the Federal Reserve's Regulation T, you can borrow up to 50% of the purchase price of a stock. You pay interest on the loan.
Margin amplifies both gains and losses, and a falling price can trigger a margin call.
In Journey Shares
The bank lends for margin buys under Reg T, with a margin call if your own stake falls below 25%. →
Related terms
- Leverage: Leverage is using borrowed money to increase the size of an investment, which magnifies both gains and losses.
- Margin call: A margin call is a demand from your broker to add cash or sell investments because your own stake in a margin account has fallen below the required minimum.
- Collateral: Collateral is an asset a borrower pledges to a lender, which the lender can take or sell if the loan isn't repaid.
- Short selling: Short selling is borrowing shares, selling them, and buying them back later, to profit if the price falls.
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