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margin account investment & finance definition
A brokerage account that permits an investor to purchase securities on credit and to borrow on securities already in the account. Buying securities on credit and borrowing on securities are subject to standards established by the Federal Reserve and/or by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding. Also called general account. Compare cash account. See also initial margin requirement, maintenance margin requirement.
Are there any advantages to opening a margin account as opposed to a cash account?
A margin account provides the flexibility to borrow funds using your securities as collateral. This can be an advantage if used properly. Funds from a margin loan can be used to purchase other securities, or they can be utilized for consumption. The risk is that a decrease in the market value of the account can create a “margin call,” which requires the deposit of additional securities, the deposit of cash, or the liquidation of some securities held in the account.
George Riles, First Vice President and Resident Manager, Merrill Lynch, Albany, GA
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