A Quick Guide to MTF Stocks and How They Work
A Quick Guide to MTF Stocks and How They Work
Blog Article
Margin Trading Facility- MTF allows investors to buy stocks by paying only a part of the total value while the broker funds the rest. Simply put — it’s like buying stocks on credit, but with your demat account.
How Does MTF Work?
You select eligible stocks from the mtf stock list.
You pay a margin amount (usually 25%-50% of the stock value).
The broker funds the remaining portion.
You hold the stocks in your demat account, but the broker has a lien (right) on them until you repay.
Example
| Stock Price | Your Margin (50%) | Broker Funding (50%) |
|---|---|---|
| ₹1,00,000 | ₹50,000 | ₹50,000 |
You can leverage more with less capital, amplifying both potential gains and risks.
Key Advantages
Higher buying power with limited funds.
Flexibility to hold positions longer (unlike intraday trades).
Diversify portfolio with access to multiple stocks.
Risks to Watch
Interest costs on borrowed funds.
Potential losses magnified if stock price drops.
Margin calls if stock value falls and you need to add funds.