Investment Strategies

Leverage

A third strategy known as leverage can help increase your purchasing power. This is because you spend only a small portion of your own money to make an investment of much greater value. For instance, if you borrow 80% of the cost of your home, you can live in a house of much greater value than you would have been able to purchase otherwise. If you sell the home for more than you borrowed, you could make a profit. However, if its value drops, you could end up losing your investment principal and still be responsible for the amount you borrowed to make the purchase. Depending on how much the asset drops in value and the cost of borrowing, you could end up facing significant losses.

You can also use leverage by purchasing stock on margin, or buying an options contract.

Margin Trading at Scottrade

Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Scottrade's margin agreement, available at scottrade.com or through a Scottrade branch office, contains the Margin Disclosure Statement and information on our lending policies, interest charges and the risks associated with margin accounts.

The information and content provided in the Scottrade® Knowledge Center is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.