LogFAQs > #952797979

So the risk of margin isn't the interest charged as much as that they get their money back at all costs

So if your portfolio goes down you MUST sell at a loss eventually and they get theirs back before you get yours.

The most extreme example, since a lot of places will let you use your entire portfolio value on margin, is for example a case where you use 10k on margin and have 10k of assets. So your portfolio becomes 20k value. But if your portfolio falls 50%, you are forced to sell and they get their money first, so your 10k value goes straight to them. Red sox posted a table once that illustrates this better.

Anyway this is only really a problem if you're using a lot of margin or your stuff goes down a lot. You can't disasterproof your portfolio but if you only use say 10% portfolio value margin the chances of it actually mattering are really really low unless you're investing in a super unsafe way.

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No problem!
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