Buying on Margin April 18, 1999. Margin is wonderful when it works. It's horrible when it doesn't. To see the potential, take a $20 stock that rises to $30. If you bought for cash, you made 50% on your money. If you bought on margin, investing just $10 and borrowing the other $10 from your broker, you made 100% on the money you put up, minus the interest you owe on the loan. But just as margin enhances your gains, it deepens on your losses. For example, say that your $20 stock dropped to $10. Cash buyers lose 50% of their money. Margin buyers lose 100% and still have to come up with the interest they owe on the loan. Investors who trade their accounts online can blunder into debt unintentionally. For novices, trading is an accident waiting to happen. If you are not an expert on trading online, then it is not recommended. The investors most likely to hear the explosion are those buying volatile stocks on margin accounts. They think they know what they're doing, then.bang!! A lot of money has been lost, especially when it takes you out of the market with less money to trade with. Many years ago I traded on margin and lost both times when a professional market maker told me these two stocks were going to go through the roof. The only thing that went through the roof was my blood pressure! The Federal Reserve establishes minimum margin requirements. At present, you can borrow up to 50% of the value of most stocks. In recent months, many brokers have reduced the amount they will loan on the most volatile stocks. George

Resources Online Investing - Online Investing is a wonderful guide for using the Internet to find, research, and buy winning stocks. Jon D. Markman, managing editor at MSN MoneyCentral Investor, writes that the Internet makes it easy to build a highly profitable portfolio. Be a Millionaire - Find out what it takes to become a millionaire.     Our editorial goal is to provide a forum for investment ideas. Our articles, columns, and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Kolias & Co of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.    Privacy Policy | © 1998-2002, Kolias & Co | Liability Disclaimer