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"Margin" is borrowing money from your broker to buy a stock and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. But margin exposes investors to the potential for higher losses.
Let's say you buy a stock for $50 and the price of the stock rises to $75. If you bought the stock in a cash account and paid for it in full, you'll earn a 50 percent return on your investment. But if you bought the stock on margin - paying $25 in cash and borrowing $25 from your broker - you'll earn a 100 percent return on the money you invested. Of course, you'll still owe your firm $25 plus interest. The downside to using margin is that if the stock price decreases, substantial losses can mount quickly. For example, let's say the stock you bought for $50 falls to $25. If you fully paid for the stock, you'll lose 50 percent of your money. But if you bought on margin, you'll lose 100 percent, and you still must come up with the interest you owe on the loan.
Margin accounts can be very risky and they are not suitable for everyone. Before opening a margin account, you should fully understand that: * You can lose more money than you have invested; * You may have to deposit additional cash or securities in your account on short notice to cover market losses; * You may be forced to sell some or all of your securities when falling stock prices reduce the value of your securities; and * Your brokerage firm may sell some or all of your securities without consulting you to pay off the loan it made to you. You can protect yourself by knowing how a margin account works and what happens if the price of the stock purchased on margin declines. Know that your firm charges you interest for borrowing money and how that will affect the total return on your investments. Be sure to ask your broker whether it makes sense for you to trade on margin in light of your financial resources, investment objectives, and tolerance for risk
What else can I help you with?
What is it called when stock is bought for a fraction of its cost and then resold for a profit without the full purchase price never having been paid?
This process is called purchasing on margin. This is actually one of the leading causes of the stock market crash in the 1920's, when the margins were called and they were unable to be paid.
On which does fundamental analysis of a company's stock focus?
Fundamental analysis of a company's stock focuses on evaluating the company's financial health and intrinsic value by analyzing its financial statements, such as the balance sheet, income statement, and cash flow statement. It considers various factors, including earnings, revenue growth, profit margins, and overall economic conditions. Additionally, analysts may assess qualitative factors like management quality, industry position, and competitive advantages. The goal is to determine whether the stock is overvalued or undervalued relative to its true worth.
What products have the highest profit margins?
Products with the highest profit margins include prescription drugs, diamonds, fountain drinks, and designer clothing. Fountain drinks cost businesses a few cents, but cost consumers $1 to $2 on average.
A part ownership of a company due to money invested is called?
the answer is stock
What is the stock split?
When a stock splits, one stock becomes two. People that own the stock can see the value of their stock for the company double.
What margins command are at the bottom of the Margins gallery?
custom margins
What is a slim profit margin?
Profit margins are usually deducted from all costs, depreciation, interest, taxes, and other expenses. The formula is: (Total Sales - Total Expenses) / Total Sales = Profit Margin Note that preferred stock dividends are usually calculated, but not ordinary stock dividends.
What does changing margins on word do?
It adjusts the margins on the page.
What are the margins for a poem?
Usually the margins are referring to the space on the paper that is around the poem. Sometimes there are notes written in the margins.
What do do documents with mirror margins always have?
Inside outside margins
When was In the Margins created?
In the Margins was created on 2005-10-31.
What are one inch margins?
they are margins that are 1 inch from the the paper
What are the traits of growth stocks?
There are a lot of different traits of good growth stocks. Two of the traits that connote a good stock are high profit margins and accelerating earnings growth.
How do you set the margins when creating a document on the computer?
custom margins command
What margins can be increased for short letters?
What margins can be increased for short letters?
When was Toward the Margins created?
Toward the Margins was created in 1996-05.
What type of margins are used in a document with facing pages such as a magazine?
In a document with facing pages like a magazine, typically mirror or alternating margins are used. Mirror margins ensure symmetrical margins on both inner and outer edges of the facing pages, while alternating margins adjust the inner and outer margins for each page to accommodate the binding of the magazine.
