How does losing money in the market work?
Here’s how I see it; I open a Scottrade account for 500 bucks. That gives me 500 bucks to invest. Now, that only means I can LOSE that 500 dollars, or is there a risk of losing even more? Can my account go into a negative balance? If it goes to 0 I’ll have to put more money in my account to invest more?
Please explain. Thanks 
As long as you’re only buying and selling stocks, you can’t lose more than the 500 you put in. The danger lies in short sales and trading options. You sound like a novice, so I wouldn’t worry about those.
3 Comments »
College Guy said :
September 7, 2009 at 4:15 pm
As long as you’re only buying and selling stocks, you can’t lose more than the 500 you put in. The danger lies in short sales and trading options. You sound like a novice, so I wouldn’t worry about those.
References :
Jawlz said :
September 7, 2009 at 5:00 pm
For basic investing (buying and selling stocks and funds), you’ll never lose more than you put in. In these, you’re essentially buying shares of ownership in a business, so the worst thing that could happen (the business goes under) will result in your shares being worth nothing.
Unless you are buying on margin (essentially getting a loan to buy stocks) or doing options (relatively complicated, check out call and put options on wikipedia for background), you shouldn’t ever run a negative balance.
Scottrade might let you buy more than you have in your account, not sure on that, in which case you’d have to send them the amount you’re over, but declining markets themselves shouldn’t ever drop you below zero.
References :
WhiffRich said :
September 7, 2009 at 5:44 pm
Your assumption is right. If you don’t trade short, or sell uncovered calls, you can only lose money one the fully paid for long position.
References :
http://www.thefundtimer.com/portfolio.htm
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