Do not borrow to invest, add leverage or buy what you do not understand
With borrowed stock purchases, falling collateral values can trigger forced selling if you cannot add funds. Paper losses become realized and you cannot simply wait for recovery. China's cited margin-account rules exclude people with under six months' trading experience or less than RMB 500,000 average securities assets over the preceding 20 trading days, illustrating that this is not a general-purpose tool.
What it takes
Free. The challenge is resisting the urge to borrow more during a rising market.
What you may gain
Leverage means borrowing to buy investments, and magnifies losses. If pledged collateral falls below a broker's maintenance requirement and you cannot restore the required coverage, the broker can liquidate positions. This realizes losses immediately, removing the option of waiting for the price to recover. China's 2015 rules prohibit credit accounts for clients lacking six months' securities-trading experience, adequate risk-bearing capacity or an average RMB 500,000 in securities assets over the previous 20 trading days. The source regards these entry conditions as a warning that margin borrowing is not an ordinary household investing tool.
Context & considerations
“Do not buy what you do not understand” is consensus advice without a direct citation here, grade C on its own. Investing with consumer loans or credit-card cash advances is also leverage; see card borrowing costs. This is not investment advice.
Research & references
China Securities Regulatory Commission (2015). Measures for Securities Companies' Margin Financing and Securities Lending Business, Order No. 117, Article 12. https://www.csrc.gov.cn/csrc/c106256/c1654005/content.shtml ; Shanghai Stock Exchange. Investor education explanation of its margin-trading implementation rules. https://www.sse.com.cn/services/tradingservice/margin/edu/c/10074042/files/a1f1c4833302451fb9130dbb94116c56.pdf