Borrowing to Invest?
- The interest rate is changed by the lender (in this case the broker), and fluctuates with the current cost of money;
- The amount one can borrow fluctuates minute by minute as stock prices rise and fall;
- The broker can take an investor out of his equity position at its discretion, and sell his stock at the worst possible time if he goes outside of the agreed-upon margin requirements;
- The Securities and Exchange Commission sets the maximum margin requirements and can change them at will. Brokers and their customers must comply immediately;
- Investors can pay off the loan by selling their stock. Their broker will deduct whatever amount was owed at the time of sale.