Buying On Margin

"Buying on margin" is using the assets you have to borrow money from a bank or broker to buy more assets.

The margin is the down payment, or the marginable securities in the investor's account that they are using to borrow the rest. As with most loans, interest and fees apply. Usually, there is not a specific monthly payback term, but there is an amount required to be kept on hand in the borrower's assets they borrowed on.

As of 2016, the Federal Reserve Board requires that only 50% of a purchase be borrowed this way. The other 50% must come from cash from the investor. This is partially to limit the damage done if the market suddenly shifts.

Say you borrow money to purchase shares, and then the shares suddenly lose value. Now you've lost the value of the shares you originally owned, the value of the shares you bought, plus all the interest and fees.

It can be a lucrative business move, but approach with caution...it's gambling with someone else's money.