Buying On Margin
Notes
- Borrowing money to buy stock
- hopes that the stock will go up and you can repay loan
- use interest to repay and collect the difference
Summary
Buying on margin was the process of Borrowing money from the bank, and investing it in stocks. The plan was that the stocks would go up, and you would make your money back to pay the bank, as well as extra to make profit off of it. This was used by many people in the 1920s, and was very successful until the stock market crash.
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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
Political Cartoon
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Subjunctive Question
Why do you think the banks allowed for people to do so much of this buying on Margin?