Purchase of shares not in cash, i.e. against immediate cash payment, but by borrowing, usually from a bank. – In times when loans are available at very low interest rates and at the same time shares are available at a low price, there is a strong incentive for such transactions. The investor expects to be able to sell the shares purchased on credit when the share price rises, thereby repaying the loan taken out and, on top of that, making a healthy profit. However, if the price of the shares purchased with the loan falls, the investor has to bear losses. This fact causes banks in Germany not to enter into transactions of this kind (in principle not). – See minimum margin rates.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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