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Article: No margin for error.(margin calls affect investors)(Brief Article)
- Article from:
- Black Enterprise
- Article date:
- July 1, 2000
- Author:
CopyrightCOPYRIGHT 2000 Earl G. Graves Publishing Co., Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Buying stocks with borrowed money hurts investors
Borrowing money is a time-honored tradition, as average folks take out mortgages to buy homes or apply for loans to pay for college. But it can have a potentially devastating impact when you're buying stocks with your broker's money, also called a margin loan.
Buying on margin entails purchasing stocks or other securities with borrowed money, using the shares themselves as collateral. A broker sets up a margin account to lend customers cash, which they then use to buy securities.
In this decade-long bull market, margin debt has been on the rise. And until recently, more investors than ever were ...