Margin trading involves the purchase of investments, such as stocks and mutual funds, in an existing investment account, using leveraging, i.e. monies borrowed against other existing investments in your investment account. Investors who purchase additional investments on margin are charged margin interest for the amount of the funds borrowed and can also expose themselves to enhanced downside losses in the event of a decline in the financial markets.
Margin trading is only for experienced, knowledgeable investors who can afford to lose money in the event of a downturn in the financial markets. In many instances, margin trading only benefits your financial advisor by affording him or her access to enhanced sales commissions through leveraged trading activity.
In the end, margin loans have to be paid back from your account and can sometimes give a false impression of account profitability. If you feel you have been victimized by inappropriate margin trading activity, we invite you for a free initial consultation to assess your case.