What is margin?
Updated over a week ago

Margin is a way of borrowing money from FlexInvest so you can leverage your holdings to purchase more shares. This allows you to increase your buying power and gain flexibility for your cash. In case you see an opportunity in the market and want to invest more, a margin plan helps you to do so right away without needing to deposit funds from your bank account.

While borrowing money on margin is technically a loan, the process varies quite a bit from a traditional bank loan. Rather than perform a credit check or look into your financial history (like a bank), FlexInvest simply assigns the amount of credit loaned based on the value of the assets you hold in your account, which are pledged as collateral on the loan.

This credit loan will represent the money that you're allowed to borrow from FlexInvest to keep investing. Of course, you’ll have to pay the loan at some point, but investing with margin is a way to increase the potential profit of your investments.

Margin in action

Say you bought $1,000 worth of stocks after depositing $500 in cash and borrowing $500 on margin. This will make your portfolio to be valued at $500 ($1,000 - margin loan = $500).

Supposing that the stock price jumps 25%, the value of your shares will increase to $1,250. However, since half of your initial investment was acquired using a margin loan, your portfolio would now have a value of $750, leaving you with $500 you owe in margin used.

If you made your initial investment with just your $500 and no margin loan, your profit in this case would have been just $125 instead of the $250 profit you earned thanks to a margin loan. Awesome, right?

Nevertheless, now let's assume the stock price went down by 25%. The value of your shares will go down to $750. Since half of your investment was settled with a margin loan, your portfolio would be worth $250 and you would owe $500 in margin used.

In this negative scenario, there's a loss of $250 instead of the $125 you would have lost if you invested without a margin loan.

As you can see, margin could be a very profitable tool if you make wise investment decisions and the market moves in your favor.

Even though margin plans are available for everyone in FlexInvest, you'll be able to receive a margin loan if you meet eligibility requirements.

Investing in securities or other financial instruments always involves the potential of losing your money. FlexInvest recommends considering your investment objectives and risks before investing. For more information, please read our Risk Disclosures Statement and our Terms & Conditions.

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