Stocks Intermediate: Types of Stock Accounts

Introduction to Types of Stock Accounts Brokerage Cash Accounts Brokerage Margin Accounts Brokerage Wrap Accounts Brokerage Option Accounts Brokerage Specialty Accounts Summary of Types of Stock Accounts
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Brokerage Margin Accounts

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Brokerage Margin Accounts

Margin is the amount you pay when you use your broker’s credit to buy securities.

The advantage of a margin account

A margin account lets you borrow cash quickly at favorable rates. You make a secured loan against your own portfolio. The advantage is that you do not have to sell any of your portfolio to obtain the cash. Furthermore, you have no repayment schedule. You are free to repay the loan at any time, unless your collateral falls below the required amount. While most investors use the borrowed cash to buy additional securities, you can use it for any purpose. Having a margin account is like having a pre-approved credit line with your broker. However, the wholly owned securities in your portfolio are collateral for the loan. You will also need a margin account if you make short sales.