Rewards of Margin Investing

Buying on margin is basically buying stocks with money borrowed from your online broker or brokerage firm. The rewards are magnified and far outweigh the risk because it is a leveraged transaction (leverage is the use of borrowed money to make an investment and the return on an investment). Leverage allows people to get more done with the same amount of resources and your potential for profit is greater because you are doubling your money to purchase stocks versus purchasing the stocks outright. It challenges the old adage “It takes lots of money to make money.” Additionally, margin investing allows investors to essentially double their buying power by using their existing funds and stocks they own as collateral, and then borrowing against those assets at a reduced interest rate to purchase stocks.
Regardless of method, tactics or philosophy used by individual investors, all forms of investment in the stock market involve some risk. Therefore, investors must look at risk v...