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How does buying stock on margin work?

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  • Anonymous
    6 years ago

    You borrow the money from your broker to buy the stock. You pay interest on the money you borrow. If your investment stays neutral (doesn't gain or lose), you lose because you're still paying the interest on the loan. Any gains will be reduced by the interest on the loan.

    You must have at least 50% equity in your investment at all times. If your investment goes down, you will have to pony up more cash (or stock) to ensure that you have 50% equity.

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