What is the concept of “buying on margin” in investing?

Buying on margin refers to the practice of borrowing money from a broker to purchase securities, such as stocks. When an investor buys on margin, they are essentially using leverage, borrowing part of the money needed to make the purchase and using their existing investments as collateral. This allows investors to control more stock than they could with their own capital. However, buying on margin is risky because if the value of the stocks falls, the investor is still required to repay the borrowed money. If the loss is significant, the investor may be forced to sell assets to cover the debt, potentially resulting in a loss greater than their initial investment.