stock margins?

Question

is this really a loan from the stock brokers? At 10% APR it sounds pretty fair given you play the right cards is there a catch? TIA

Answer 1

Generally you borrow money from your broker to buy stocks. If you do well, you can increase your gains.

If you are wrong, though, your losses will be magnified, and you will get the dreaded margin call.

You will pay the 10% to buy stocks. I think only an expert should even consider buying stocks on margin.

Answer 2

Buying on margin is borrowing from the broker, 10% APR sounds good, but it will go up & down depending on Interest rates.
It will be based on so many points above Prime.

Your margin account cannot exceed a certain Percentage and I don't know what they are, but an example would be,,,,If the value of the assets in your account were $10,000, you would only be allowed to have borrowed 50% of that...So $5M your money, $5M the brokers money. If the value of the portfolio dropped because of stock price action, you would get a Margin Call. Which means the broker would call you and ask you to put more money in to make the Percentage of Value you have in it Matches what the brokerage has in it...For Example...Asset drops to $9M, you have to come up with another $1M to make the asset value $10M again...If you can't, the brokerage will sell some of your stock, and this will cause you selling fees, as well as still owing them $5M plus interest.

Margin accounts have a way of coming up and biting you.
It is not for the Timid nor the inexperienced

Answer 3

The catch is that it's hard to make a consistent 10%
The professional banker/broker is willing to use their money to make a guaranteed 10% loaning it to you. If it were easy they would be the experts making more. Its guaranteed for them because they will only loan you half of stocks value. If and when it goes down, they will sell it to get their money back.

Answer 4

1) Yes.
2) There is no catch.

Top 4 Answerer.