RealMoney Radio Mailbag: Margin of Error

A listener learns why Cramer believes that buying stocks on margin is risky business.
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Editor's note: The following are questions received from listeners of "RealMoney Radio." To send Cramer a question about topics from his radio show, click here. Listen to Cramer's latest radio show by clicking here.

Jim, do you recommend buying stocks on margin?-- John from Kentucky

Jim Cramer

: Stocks can be risky enough on their own, so I recommend that most investors avoid buying stocks on margin. Borrowing money to buy stocks can result in extreme pain in a down market.

Plus, if you aren't watching your stocks closely, it is very easy to get caught in a margin call. This means that your broker sells stock out from under you to repay the loan.

Jim, if oil goes down to $55 a barrel, would the drillers still do well?-- Phil from New York

Jim Cramer

: If oil went down to $55, the stocks of the drillers would get hit pretty hard, but they would probably still report pretty strong earnings.

When oil companies make drilling decisions, they focus on what they think oil will do in the long-run, not what the commodity is doing today or even this year.

Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by

clicking here

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