: If a stock rose in value, the investor kept the profit minus the loan and interest, leading to massive gains on their original cash investment. The Risks and The "Margin Call" Stock Market Crash of 1929 | Federal Reserve History
In the 1920s, was the practice of purchasing stocks by paying a small fraction of the price upfront—typically 10% to 20%—and borrowing the remaining 80% to 90% from a stockbroker . The Mechanics of 1920s Margin Buying margin buying definition 1920s
: The purchased shares themselves served as the security for the loan. : If a stock rose in value, the
: Investors could "control" large amounts of stock with very little capital. : Investors could "control" large amounts of stock
For example, a $100 investment could purchase $1,000 worth of shares.
: The broker provided the rest of the funds, often charging interest rates between 14% and 19%.