The hardest part in anyone's financial life is building up a nest egg, once that is done, most people will discover, through happenstance or whatever, that money makes money. For instance, many people have a brokerage account, which can be opened for trivial amounts of money such as $1000, and with that brokerage account they have a vast array of equity investments that they can make. When opening up a brokerage account there are a multitude of questions to answer, to which, one of them is whether you desire to have a "cash" account or a "margin" account. A cash account is about as simple as it can get, which simply means that if you deposit $10,000 you can buy up to $10,000 worth of equities or mutual funds. A margin account, however, is fundamentally different, to which, typically in most brokerage accounts, if you deposit $10,000 you can buy up to $20,000 worth of equities or mutual funds. As you might imagine, there are caveats when it comes to margin accounts, to which the two most fundamental caveats, is that when you borrow money to utilize for your margin account, the brokerage will charge you interest in order to do so, additionally, and fundamentally of extreme importance, should your investments go down in value, you will be subject to a "margin call", which in essence means that you must either come up with more equity by depositing more money into your brokerage account or sell at least part or some of your positions. This means that a margin account is not for the faint hearted and further that those utilizing margin accounts must as a matter of policy, pay daily attention to their brokerage positions or possibly suffer the consequences for their blithe unconcern.
Margin itself is governed by the Federal Reserve's Regulation T as well as the brokerage company that you are invested with, so that, even though the regulation allows you to margin at a 1:1 ratio to your equity amount, in theory your brokerage company, might be more conservative than that, and hence rather than let you margin at 50% equity, they may set the number at 70% equity, depending upon a lot of factors, which would include your experience, your net worth, and the investments that you make. There is, however, another part of margin, which many people are unaware of, which is maintenance margin, this is margin that goes into effect usually after a designated period of time, which typically stipulates that the amount of equity that you need for your securities drops from 50%, to as low as 25%, which is the legal limit. This then indicates that an equity cash deposit of $10,000 would now at its maximum, be able to hold $40,000 worth of equities, or twice the initial margin requirement.
So what does this all really mean, well, in an age of unprecedented low interest rates, the cost of borrowing money has plunged significantly, so that margin rates can be so low that brokerage accounts exceeding $3.5 million, for instance, can be offered margin loan rates of just 0.97% or possibly even lower. What this means in effect, is that because margin rates are so low, and because you can leverage up your investments to a 3:1 ratio (equity 25%), that sophisticated organizations do this sort of thing all of the time so as to maximize potential gains in an era to which it is difficult to effect a yearly gain of 7-8%. According to nyxdata.com margin debt in America in December of 2015 was at $461,200 ($ in millions) or nearly 1/2 trillion dollars, against free credit cash accounts of $151,618 ($ in millions) and credit balances in margin accounts of $127,891 ($ in millions). The bottom line is that the stock market is highly leveraged, and leveraged money is money that is highly susceptible to panics, and panics lead to recessions and/or to depressions.