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Finance Glossary

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Initial Margin

Definition:

The initial margin is is the amount that your broker will lend you so that you can buy stocks and securities. The minimum margin percentage is 50% (required by regulation), but brokers can choose higher margins.

Brokers offer margins to lure in investors (sort of "buy one and pay later for the rest" kind of deal). If you default or your stock goes down in value, though, the broker might be left holding the bag, which is one reason why some brokers impose higher margins. 

Example

 If your broker has a 60% margin policy, that means that you have to put up 60% of the purchase price; the broker will lend the rest. If you decide to invest $100,000, that means you have to pony up $60,000 and the broker will lend you $40,000 so that you can invest the $100,000.