Chapter 02 - Slides 09-24 - Buying on Margin and Margin Accounts
Author(s): Paiano, Frank
College: Southwestern College
Subject: Banking and Finance
Just as banks and credit unions allow you to borrow from the value of your home, brokerage firms allow you to borrow from the value of your securities. This is called buying on margin. It allows an investor to borrow from the value of their securities without having to sell the securities which triggers commissions and taxes. However, for the more speculative-inclined, it also allows an individual to “leverage” their investment. This has the potential to magnify your gains but also has the potential to magnify your losses. Come and see if you will want to buy on margin.
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