When it comes to investing in securities, the Initial Margin is the percentage of the purchase price that must be paid in cash. According to Federal Reserve regulations, this minimum is set at 50%. However, brokerages and exchanges are allowed to require a higher initial margin.This requirement exists to protect investors from taking on too much risk. By ensuring that a significant portion of any security purchase is paid upfront in cash, investors are less likely to default on their investment if the value of the security falls.While some may view the initial margin as a hindrance, it actually provides an important layer of protection for investors. So next time you're considering an investment, be sure to factor in the initial margin requirements before making your decision.
