|Motley Fool: Feb. 1, 2014|
|News - St Augustine Area & St Johns County|
Ask the Fool
Q: How does buying stocks “on margin” work? — J.M., Kalamazoo, Mich.
A: It’s when you invest with money borrowed from your brokerage, paying interest for the privilege. Using margin will amplify your gains — but also your losses.
Here’s an extreme example: Imagine that you hold $100,000 of stocks and you borrow $100,000 on margin to invest in additional stock. If your $200,000 portfolio doubles in value to $400,000, you’ll have earned an extra $100,000 (less interest expense) thanks to margin.
Read entire article: Motley Fool: Feb. 1, 2014