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iris [78.8K]
3 years ago
11

Why was stock bought on margin considered a risky investment?

History
1 answer:
lara31 [8.8K]3 years ago
7 0
The answer is <span>Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan.
Investors tend to buy the stock on margin if they do not possess enough cash to purchase the full stock, which makes them forced to fill in the remaining amount by borrowing it from brokers or bank. If the stock ended up going down during the process, the investors will ended up destroying their overall net worth.</span>
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