Suze Orman

you would absolutely know what margin is and how dangerous it is because you are not a sophisticated investor.

However, wait, KT, the mere fact that this person is asking that question

says to me, you absolutely should not do it.

And why your broker would be even telling you to do it is beyond me.

So KT just said, she doesn't know what-

to give you the ability to buy more stock than probably money you have to buy on your own.

And for that loan, they charge you an interest rate.

Now that sounds like a great deal.

Let's just say you have $10,000 that you want to invest in XYZ stock, and the stock is at $10 a share.

Now, normally, you'd only be able to buy 1,000 shares.

But your brokerage firm, because you signed up for margin, says, hey, I'll lend you $10,000.

And guess what?

That means you can buy 2,000 shares.

And you really think that this stock is going to go up and you think, yeah, if I have 2,000 shares, I can make twice the amount of money.

So let's say that's true.

Let's say it goes from 10.

to 15, it's now gone up $5 a share and you decide to sell.

If you had just purchased 1,000 shares, KT, you would have $15,000 after you sold, or you would have made $5,000 on your $10,000 investment.

It may be a short period of time.

That's a 50% return on your money.