Investing with Margin

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?

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.

What if I’m not suitable for margin?

Federal regulations require you to have $2,000 in your account and a suitable investment profile in order to use margin. Suitability is determined by asking you a few questions in the app about your investment experience, goals, and sensitivity to risk. You can enable margin while you’re on Gold by (1) increasing your account value to $2,000 by depositing funds and (2) updating your investment profile.

Don’t worry—you can still sign up for Gold and use all the other premium features even if you are not suitable for margin.

How do I pay for margin?

The first $1,000 of margin is included with your $5 monthly fee. If you decide to borrow more, you’ll pay 5% yearly interest on any margin used above $1,000.

Your interest is calculated daily on your end of day margin used. The daily interest rate is 5% divided by 360. For example, if you use $3,000 of margin, we’ll calculate $0.28 of daily interest as follows:

  • $3,000 margin used
  • $1,000 included with your monthly fee, leaving $2,000 subject to interest
  • $2,000 * 5% / 360 = $0.28 per day

We’ll accumulate interest every day and charge your account every 30 days at the end of your Gold billing cycle. You can always check the current status of your billing cycle and view unpaid interest in the Gold Billing section of the Account Overview.

Robinhood can increase or decrease the interest rate at its discretion and will provide 30 days advance written notice of any changes to the interest rate.

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.



Was this article helpful?
4 out of 4 found this helpful
Have more questions? Submit a request