Risks Of Buying Stocks On Margin

July 6, 2012 - PRLog -- Margin accounts can be very risky and they are not suitable for everyone. Before opening a margin account, you should fully understand that you can lose more money than you have invested, you may have to deposit additional cash or securities in your account on short notice to cover market losses, you may be forced to sell some or all of your securities when falling stock prices reduce the value of your securities and your brokerage firm may sell some or all of your securities without consulting you to pay off the loan it made to you.

Stock Market Beginners Guide explains the risks involved when buying stocks on margin at
http://www.stockmarketbeginnersguide.com/buyingsecuritiesonmargin.html

You can protect yourself by knowing how a margin account works and what happens if the price of the stock purchased on margin declines. Know that your firm charges you interest for borrowing money and how that will affect the total return on your investments. Be sure to ask your broker whether it makes sense for you to trade on margin in light of your financial resources, investment objectives, and tolerance for risk.

The Federal Reserve Board and many self-regulatory organizations (SROs), such as the NYSE and NASD, have rules that govern margin trading. Brokerage firms can establish their own requirements as long as they are at least as restrictive as the Federal Reserve Board and SRO rules.

Stock Market Beginners Guide helps educate new investors to stock market investing, they educate investors with the common knowledge needed for buying and selling stocks, penny stocks, bonds and mutual funds and provides the basic understanding and concept of stocks and the stock market. They inform new investors on how to do basic research on publicly traded companies along with learning when it may be time to buy or sell stocks, penny stocks, bonds and mutual funds.