MIRED IN MARGIN LOANS

Physician's Money Digest, April30 2003, Volume 10, Issue 8

Caution:

Most physician-investors think ofmargin loans as borrowing from abroker to acquire more stock thanthey have cash to buy. Critics charge,however, that back in the days of thebull market, brokers hungry for theinterest revenue on margin loansand eager to hang on to investmentcash encouraged clients to take outmargin loans for big-ticket purchases.Rather than selling stock tofinance the buy, the clients wereurged to use their portfolios as collateralfor a loan. When the marketsank, stockholders had to come upwith more money or have stocks intheir portfolio sold to cover the loan. When you open a new brokerageaccount, the application yousign may give the broker permissionto trade on margin without yourknowledge, unless you specificallyindicate "no."