How to buy stocks using Margin Trade Facility?
Margin trading offers investors an opportunity to amplify their investment returns by borrowing funds to purchase stocks and leverage their investment potential. In this article, we will explore what MTF (Margin rading Facility) is, with an example of MTF in the share market, and outline the steps involved in buying stocks using the MTF online.
What is MTF/eMargin?
Margin Trade Facility (MTF) or eMargin is a facility provided by financial institutions that allows investors to buy stocks using borrowed funds. In MTF, the investor receives a margin (loan) from the institution. This loan is then used to purchase additional stocks. The stocks are pledged in favour of the broker. MTF provides investors with the ability to invest beyond their available cash balance, potentially maximizing their investment opportunities.
One valuable tool that can assist investors in understanding the benefits of utilizing MTF is the MTF Calculator. It enables investors to assess the potential costs and benefits associated with margin trading. By inputting data such as the borrowed amount, interest rate, holding period, and expected return on investment, the MTF Calculator can provide valuable insights into the potential outcomes of utilizing margin trading. It helps investors evaluate whether the expected gains from the investment outweigh the costs incurred through borrowing and interest payments.
Example of MTF in the Share Market
Suppose you have a desire to purchase stocks valued at ₹1,00,000, but your account balance is only ₹25,000. To cover the remaining ₹75,000, you have the option to utilize eMargin facility. Your broker will provide the necessary funding in exchange for interest on the borrowed amount. In this scenario, m.Stock charges 9.49% p.a. which amounts to ₹585 for a 30-day holding period.
Steps to Buy stocks using MTF Online
Look for a Broker with MTF Services
To begin, it is crucial to choose a reliable broker that provides MTF services. Look for a broker that offers lowest interest rates, unlimited holding period, % of funding, number of scrips, pledge charges etc, as this can significantly impact your costs. m.Stock by Mirae Asset is a broker which stands out as an excellent choice for MTF. They offer one of the lowest MTF industry starting from 6.99%, unlimited holding period, and zero subscription charges. By selecting mStock, you can enjoy a seamless margin trading experience with favourable terms and enhanced profitability.
Open Free Demat Account
After selecting the broker, the next step is too open Demat account. m.stock is a broker who is now providing free Demat account opening.
Select the Stock & Enter the Quantity:
Select the stock you wish to purchase using MTF. Conduct thorough research on the stock’s performance, financials, and market trends. Once you have decided, log in to your trading account and enter the quantity of the stock you want to buy.
Pledge the Selected Stocks:
To avail the MTF, you need to pledge a certain percentage of your existing stocks as collateral. The financial institution will determine the percentage based on their lending policies and risk assessment. Pledging stocks provides security to the institution against the borrowed funds.
Place the Order on the Platform:
After pledging the required stocks, you can proceed to place the order on the trading platform. Various brokerage platforms offer MTF services, such as m.Stock by Mirae Asset. Make sure to check review the order before submitting it and ensure that you have sufficient funds in your MTF account to cover the purchase.
Monitor the Investment:
Once the order is executed, it is essential to monitor the investment regularly. Keep track of the stock’s performance and market conditions. Remember that margin trading involves additional risks, as both gains and losses are amplified. It is crucial to stay informed and make informed decisions based on market analysis.
Margin Trade Facility (MTF) or eMargin provides investors with the opportunity to leverage their investment potential by investing with borrowed funds. Investors can borrow additional funds and purchase more stocks than their available cash balance permits. The steps involved in buying stocks using MTF online include selecting the stock and placing the order and pledging with CDSL/NSDL Understanding the proper usage of eMargin trading can bring substantial advantages to investors.
Among the companies offering Margin Trading Facility (MTF) services, m.Stock by Mirae Assets Capital Markets stands out as an excellent option. This platform empowers investors by providing a range of benefits. Notably, m.Stock offers one of the lowest interest rates in the industry, starting from 6.99% per annum (with a daily interest rate as low as 0.0192%). Additionally, investors can enjoy up to 80% funding on more than 700 stocks, along with the flexibility of an unlimited holding period. Furthermore, m.Stock does not impose any subscription fees or hidden charges, making it a transparent and cost-effective choice for investors.
Remember that margin trading involves risks, and it is advisable to seek advice from financial professionals or conduct thorough research. We trust that this article has equipped you with a thorough comprehension of the multitude of advantages that Margin Trading Facility (MTF) can provide. Armed with this understanding, we encourage you to embark on your investment journey with optimism and assurance.