Buying on Margin

Buying on margin is the process in which an investor purchases an asset with leverage by borrowing a balance from a bank or a stock broker. Buying on margin allows for an investor to purchase assets with, for example, 20 percent cash and 80 percent leverage, where the leverage is secured by marginable securities held by the investor. 

In order to buy on margin, an investor needs to apply for approval from a bank or broker. The degree of buying power an investor has access to is a function of the total dollar amount of purchases the investor can make with cash and securities holdings.

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