Buying on margin will prevent losses.

Question

Quizplus · Accepted Answer

Buying on margin involves borrowing money from a broker to purchase securities, which increases the potential for gains but also increases the potential for losses. If the value of the securities purchased with borrowed funds decreases, the investor may experience a significant loss and may be required to repay the loan even if the value of the securities is less than the amount borrowed. This can lead to even more losses and potentially lead to a margin call, where the broker requires the investor to deposit more funds to cover losses. Therefore, buying on margin does not prevent losses, and may actually increase the risk for losses.

Buying on Margin Will Prevent Losses