The Iowa Securities Bureau is warning the state’s investors to be very careful when considering buying stock through what’s called “on margin.” Craig Goettsch, Iowa’s Superintendent of Securities, says it’s buying stock with borrowed money and it can be a high-risk venture.Goettsch says when an investor buys stock on margin, the stock becomes the asset that’s backing the loan. An investor can buy 100-thousand dollars worth of stock by putting up 50-thousand. If the stock loses 10-thousand dollars, the investor will still owe the brokerage the other 50-thousand.Goettsch says the record drop in stocks back on April 14th left many investors holding their breath. He says for those who borrowed money from their brokers, the consequences are much more serious and possibly devastating.Due to so many concerns, Goettsch says some brokerage firms have restricted margin lending on some speculative stocks.
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