Buying on Margin
Notes
-Borrowing money to buy stock in the hope that it will go up
-You can repay the loan and collect the difference
-Led to stock market crash
-You can repay the loan and collect the difference
-Led to stock market crash
Political Cartoon
Quote
"In the 1920s you could buy stocks on margin. You could put 10 percent down and borrow the rest against your stocks."
-Ron Chernow
-Ron Chernow
Subjunctive Question
If the stock market hadn't tremendously collapsed, what would the outcomes of the Great Depression be? Or would the Great Depression had been avoided completely?
Interesting Fact
As a result of the Great depression over 13 million Americans lost their jobs by 1932
Summary
Buying on margin is the action of borrowing money from a broker to purchase a stock. Margin trading allows you to purchase more stocks than you could yourself. For most stocks in the 1920's, you only had to pay 10 to 20 % of the stock on your own. The rest of the investment could be borrowed.