Buying stock on margin lowers the overall risk for the investor.

Question

Quizplus · Accepted Answer

Buying stock on margin actually increases the overall risk for the investor because they are borrowing money to purchase more stock, which means they have more money at stake in the market. If the stock price drops, they may not be able to repay the loan and will incur additional fees and interest. Margin trading can potentially lead to greater profits but also carries greater risks.

Buying Stock on Margin Lowers the Overall Risk for the Investor