Glossary · Defined term
Margin
Margin is money borrowed from a broker to buy securities, with the purchased assets serving as collateral. Definition plus a worked example.
Last updated Oct 2, 2026
What it means
Margin is money an investor borrows from a broker to buy securities, with the purchased securities serving as collateral for the loan. Borrowing magnifies results: gains are larger relative to the investor's own cash, but losses are larger too, and interest accrues on the borrowed amount. U.S. rules generally allow borrowing up to 50 percent of a purchase's value at the start, and brokers require the account to maintain a minimum equity level, often around 25 percent. If the account falls below that level, the broker issues a margin call and can force-sell holdings to repay the loan. Margin is powerful leverage with genuinely painful downside.
An example
For illustration, an investor buys $10,000 of stock with $5,000 of their own money and $5,000 borrowed on margin. If the stock rises 20 percent, the $2,000 gain is a 40 percent return on their $5,000 (minus interest). If it falls 20 percent, the $2,000 loss wipes out 40 percent of their cash, and a further fall could trigger a margin call.