Licensed Dealer in Securities AFS License No: 238699

Date:

Margin Lending

Margin lending is simply an investment strategy where you borrow money, using your existing cash, shares or managed funds as security, to invest in more shares or managed funds. It is possible to gear as part of your regular savings plan. Regular gearing allows you to match your own equity each month with money-borrowed from your margin loan, potentially doubling your monthly investment.

How it works is that your existing portfolio is used as security for the loan and the lender applies a lending ratio to each investment in the portfolio. You can then borrow up to that level to purchase other shares. If the value of the shares that are used as security fall then you have to sell some of the shares or deposit cash to maintain the lending ratio. This is what is known as ‘margin call’.

Like many other investment strategies margin lending can be risky and consequently is not suitable for everyone. Your advisor can help you determine if a margin lending strategy is suitable for your individual needs.

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