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MARGIN

investing wednesday word of the week Dec 12, 2018

Definition

Margin is when brokers (Charles Schwab, TD Ameritrade, etc.) lend money to investors to make trades (think of credit) so they can leverage their assets to make more money.

Why It's Important
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Investor beware!  Although using a margin account has the ability to make you more money, it is very risky.  If you are trading on margin and the investments drop, you still owe that money to the brokerage.  In addition, brokers can initiate a "margin call" where they demand some, if not all, of the money they lent to you right then and there.  They can immediately sell your assets for the debt.  It is best to just use a cash account especially if you are a new investor. 

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