A "margin account" is simply an investment account that has been approved for the use of borrowed money. Most people would prefer not to put borrowed money into the stock market, but a margin account allows us to do just that. Of course, nobody's forcing us to use the line of credit that a margin account offers, any more than VISA is forcing us to spend money we don't actually have. As I've written elsewhere, a margin account is no more inherently dangerous than a bottle of Jack Daniels sitting on the shelf. It just depends on who opens it and how they manage things once the cap is off.
When we borrow against "SMA" we pay in the neighborhood of the prime rate, and, believe it or not, margin interest is tax deductible, meaning you can use it to offset/reduce any dividends or bond interest you receive in that account. So, it's a pretty decent line of credit to tap in an emergency. At least that's what I'm telling myself now that I just tapped it for $5,000. Long story short, I split up with a woman a few months ago and badly underestimated all the costs associated with the unwinding of that particular merger. I now sit here with $500 in checking, $251.11 in savings, and no car after buying a house in Texas that she will rent and eventually buy from me. In other words, I have two mortgages starting in July and almost no cash. You're derned tootin' I hit that line of credit called "SMA" yesterday. Took about 30 seconds to send TD Ameritrade an electronic request for $5,000. And, if the stock market cooperates, I should be able to borrow another $5,000 or more in a few months. Like every other gambling junkie who puts it all on number 21, I'm telling myself that Hospira is going to rise $10 a share, and I'll be able to sell 1/2 my shares to pay back the $5,000. Of course, you know how these "plans" tend to pan out, but for right now, I am really looking forward to receiving the $5,000. It might be intersting to track the progress of this potentially bone-headed decision; in fact, let's plan on it.