Dangers of borrowing money to buy shares

Over the past few weeks, volatility and stock market trends led traders and investors to lose very large sums of money not to mention sleep.

For traders who were prepared for such developments, they lost very little else. They would have lost about 5-10% while the average trader has lost close to 20% if not more.

The average investor was drawn to the last “Bull Run” as a moth a flame. Having unrealistic expectations of easy money, plus they are also influenced by the advertising media, which is prevalent in the high flying stock market.

“Flavour of the month” for quite a while was in the fields of credit. They are easy to customize. Paperwork is minimal as the establishment costs. So you can be up and running, in less than.
The average amount borrowed is usually about the level of $ 100.000 for which the trader has the potential to push fifth. In this case, $ 20,000. But you can buy the full loan amount is $ 100, 000 share price. This is called leverage.

Currently, leveraging a two cool sword, you can make a good profit, but you can have large losses as well.

The average investor, who decides on the loan fields, such as “Sure Fire” ensures a quick way to earn money to always have neither the experience nor the knowledge necessary to cope with the sudden downturn in the stock market when it occurs.

Using the latest downturn in the markets as an example, where share prices fell down sharply in the region, at least 20%. Investors, who had a margin loan of about $ 100,000 was unexpectedly paper loss of $ 20,000 when it happened, they were placed in the dilemma of either passing more money (this is called a Margin Call.), or buy more shares. In many cases, borrowed to the hilt, they could do neither.