“The margin is narrow, but the responsibility is clear”
“Let us never negotiate out of fear. But let us never fear to negotiate.” John Fitzgerald Kennedy
Main Points:
Summary:
If the stock goes nowhere, you still have to pay interest on that margin loan. If the stock pays dividends, this money can defray some of the cost of the margin loan. In other words, dividends can help you pay off what you borrow from the broker.
- A risky technique involving the purchase of securities with borrowed money, using the shares themselves as collateral.
- Although the stock market has the reputation of being a risky investment, it did not appear that way in the 1920s. With the mood of the country exuberant, the stock market seemed an infallible investment in the future.
- Borrowing money to buy stock in the hope that it will go up and you can repay the loan and collect the difference.
- In the early and mid 1920’s when the stock market was popular people would buy stocks on margin in the hope they could make money, this principle works if the stocks go up, however if not, you owe a lot of money.
- Margin means buying securities, such as stocks, by using funds you borrow from your broker.
Summary:
If the stock goes nowhere, you still have to pay interest on that margin loan. If the stock pays dividends, this money can defray some of the cost of the margin loan. In other words, dividends can help you pay off what you borrow from the broker.