Although a lot of securities can be bought on margin, some securities available through ShareBuilder are not. You can see if a stock is marginable by looking at the stock quote—under “Key Elements” which will indicate if it is a marginable security. ShareBuilder applies its own criteria that meets or exceeds the Federal Reserve Board in determining which securities can be bought on margin. Penny stocks, IPOs, extremely volatile stocks, and options are examples of securities that cannot be bought on margin.
Important: Buying securities on margin is not appropriate for all investors. Before investing on margin, please read the Margin Account Agreement for important risk disclosure information, and see ShareBuilder's margin interest rates.
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Assets that are used to secure a margin loan. Collateral becomes subject to liquidation on default.
Collateral is a form of security to the lender in case the borrower fails to pay back the loan. In margin borrowing, the securities in your account act as collateral in the case of a margin call.
From time to time, ShareBuilder may require that an investor using margin deposit additional cash or securities so that the margin account is brought up to the maintenance requirement. You would receive a margin call from ShareBuilder if one or more of the stocks you bought on margin decreased in value past a certain point. If you do not deposit additional cash or margin eligible securities by the maintenance call due date, ShareBuilder will liquidate securities to meet the maintenance call. The amount of stock sold could be up to 4 times the amount of the call. Please note that if four liquidations (whether by ShareBuilder or customer initiated) occur in a 12 month period to meet a maintenance call, the account will be restricted from margin borrowing for 90 days.
To convert assets into cash or equivalents by selling them on the open market.
Individuals may choose to liquidate their investments to preserve gains or protect against loss, convert assets to cash for personal needs, or to re-allocate funds. In case of a margin call, the securities in your account may be liquidated to bring the account up to the maintenance requirement.
Leverage can be an advantage for an investor. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses.
For example, say you have $1,000 to invest. This amount could be invested in 20 shares of stock, valued at $50, but to increase leverage, you could invest the $1,000 and borrow $1,000 from ShareBuilder in a margin account. You would then control 40 shares instead of just 20; however, you would now own a greater number of shares subject to market risk.
Securities products are offered by ShareBuilder Securities Corporation, a registered broker-dealer and Member FINRA/SIPC. ShareBuilder Securities Corporation is a subsidiary of ING Bank, fsb. Brokerage Financial Statement