margin account
Definition
A brokerage account in which the brokerage lends the customer cash with which to purchase securities. Unlike a cash account, a margin account allows an investor to buy securities with money that he/she does not have, by borrowing the money from the broker. The Federal Reserve limits margin borrowing to at most 50% of the amount invested. Some brokerages have even stricter requirements, especially for volatile stocks. People usually open margin accounts to take advantage of an opportunity to leverage their investment, rather than because they don't have the money to make the full purchase. brokerages charge a relatively low interest rate on margin loans in order to entice investors into buying on margin.
 Cite this definition
Related Terms
Regulation T, broker loan, buying on margin, house maintenance requirement, hypothecation, rehypothecation, remargining, restricted account, investor's equity, closed out
Related Research Articles from the InvestorGuide.com University
Buying and Selling
Learn the best time to buy or sell an investment. Also suggests templates for investment analysis and transaction records.
The Stock Market
Learn the lingo of "the market," as well as theories about market behavior, such as random walk, behavioral finance theory, and what makes a market efficient.
Principles of Investing
Here are the seven fundamental principles of investing that every investor should know. Topics include knowing your current situation, goals and risk tolerance; getting your finances in order; thinking long term and focusing on stocks; researching and monitoring your investments; and knowing when and how to get financial help.
Featured Sponsor
|
|
