what does a "margin account" me? (when it says you need $2000 for a margin account oppposed to $500)

Answer 1

As the other answerers have noted, in a margin account you are given the ability to borrow money from your broker in order to buy "on margin", increasing the leverage of your position.
http://www.investopedia.com/terms/m/marginaccount.asp

But there are other ramifications, as well.

One big benefit to a margin account is that you are not subject to the "free ride" restrictions of the Fed's Regulation T. Under this Regulation, in a cash account if you sell Security A and turn around and use those proceeds to buy Security B, you cannot sell B until the sale of A is closed, and it takes 3 days for that.
http://www.federalreserve.gov/boarddocs/legalint/marginrequirements/2003/20030512/
In other words, a margin account gives you greater flexibility to buy/sell securities.

A big disadvantage of margin accounts is that you may receive "payments in lieu of dividends" instead of dividends if your broker loaned out the stock in your account to a short-seller. And you won't know until dividend gets paid. Brokers cannot loan out shares held in a cash account and dividends are always received as dividends by shareholders in cash accounts.
http://www.freerepublic.com/focus/f-news/923162/posts

Answer 2

If you have a margin account, the broker will lend you money to buy stocks, usually at a annual rate of about 10%, which is quite a bit lower than a credit card rate.

At Scottrade, once a month, they average your margin balance over the month, multiply by 10%, and then divide by 12 (for 12 months), and add the money to what you owe.

At most brokerages, you can borrow up to 50% of your account balance (whether in stocks or cash) to buy more stocks. How much you can borrow also depends upon how risky the stock is.

If your margin balance percentage falls below 35% (due to stock prices falling) you will get the dreaded "margin call," where you have deposit more money or the broker will sell your stocks to get the margin percentage back up to 50%. If you go margin, keep your margin percentage above 80% to avoid any nasty surprises.

Answer 3

Margin is credit, or leverage.

It means if you own $10,000 of a stock, you can borrow $5000 from the brokerage, using your stock as collateral, to buy more stock.

Margin is riskier, because you have to pay interest on the loan, and if your stock value goes down below the value borrowed, you are required to deposit the difference.

The reason they want at least $2000, is because they feel you are more financially responsible if you have more money in the account.

Answer 4

In means that you will be able to buy securities on the margin, by putting down only a fraction of its purchase price. The securities regulations require that this fraction must be at least 50%; particular brokers may have higher margin requirements.

Answer 5

It's a fancy way of saying CREDIT ACCOUNT.