In stock-market investing, what is a margin account designed to let an investor do?

In stock-market investing, a margin account lets an investor borrow money from a broker to buy securities.

The investor contributes some of the purchase price, called margin, while the broker finances the remainder. The securities and other eligible assets in the account serve as collateral for the loan. This borrowing can increase purchasing power and magnify gains, but it also magnifies losses.

If the value of the account falls below a required maintenance level, the broker can issue a margin call. The investor may need to add cash or securities, or the broker may sell holdings without waiting for permission. Interest is normally charged on the borrowed amount.

Margin accounts differ from cash accounts, where investors generally pay the full purchase price before buying. Margin rules vary by country and security type. Borrowing against shares is therefore a risk-management issue, not simply a faster way to invest.