4 tips for buying stocks with 'play money'

Decide if the risks are too great
Do your research before buying © Olga Danylenko/

One sign that the public's appetite for stocks is rebounding is the increase in margin loans.

People can often get a loan from their brokerage, using their current account as collateral and taking money out to play the market.

At the end of the 2013 third quarter, the New York Stock Exchange reported a record $401.2 billion in margin debt.

Gugle of Alpha Financial Advisors warns that borrowing to buy more securities in a play account isn't wise. If the value of the account dips to a certain level, part or all of the loan might need to be repaid, causing the investor to scramble for funds.

Likewise, Duffy says some options strategies involve borrowing, too. Employing debt is too dangerous a terrain for relatively novice investors to navigate, he says.

It's not just options, but even some exchange-traded funds, which might employ risky derivatives that "accelerate the price movement one way or another," Spero says. He warns: "People tend to get excited about trendy investments that they don't really understand and shouldn't be in."


Show Bankrate's community sharing policy
          Connect with us

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

Where should I put my money?

Dear Dr. Don, I would like to begin investing money to use in retirement. I want to be conservative with these investments, and I don't know where to begin. Any advice on retirement investing would be appreciated. Thank... Read more



Dr Don Taylor

Forgo upside to protect your backside

What if you could participate in the market's upside performance while protecting yourself against downside risk? These products exist. They are equity-indexed annuities and equity-linked CDs.  ... Read more

Partner Center

Connect with us