What is Margin Investing?
Investing on margin means that you’re borrowing money from Robinhood to buy stocks. This lets you invest more money (your own money plus borrowed money) for greater potential gains or losses. It also gives you flexibility with your cash: if you see an opportunity in the market and want to invest more, you can invest right away without needing to make a deposit from your bank.
When you sign up for Robinhood Gold, you’ll receive extra buying power. This represents the money that you’re allowed to borrow from us to invest.
What are the risks of margin?
Robinhood Gold is a margin account, so there are additional risks and responsibilities you should be aware of.
With margin investing, the returns on any stocks bought on margin directly affect your account value, whether they’re positive or negative. If the stock loses value, the losses will be deducted from your account value—not the funds you borrowed—so it’s possible for margin to increase your losses.
For example, suppose you have $2,000 in your account and own $4,000 of MEOW—$2,000 with your own cash and $2,000 with margin which you borrowed from Robinhood. If MEOW decreases by 25%, your portfolio of MEOW stock will drop to $3,000 in value. However, you still borrowed $2,000 from Robinhood and need to pay that back. Since the value of your total portfolio is now $3,000 but you owe $2,000, your account is now worth $1,000.
Can I set a limit on how much I can borrow?
Yes! We created Borrowing Limits to help you control how much margin you use. By setting a limit, you can restrict the amount of margin you have to the amount that you feel comfortable using. You can set this limit to any amount you want or remove this limit anytime from your Gold settings.
How much money can I borrow?
You can track how much margin you can use in the Gold settings screen. The Gold settings screen includes the following values:
- Total Margin – The total margin that your account is allowed to have based on your cash and the volatility of your holdings.
- Margin Available – The margin available in your account is based on the minimum of your total margin and your borrowing limit. This was previously referred to as “Gold Buying Power”.
- Margin Used – The portion of your margin available that you are currently using. This was previously referred to as “Gold Used”.
- Borrowing Limit – Your set maximum limit on the amount of money you can borrow.
You can also track your buying power in the account overview section of the app.