Margin Lending

Margin Lending

Margin lending lets you borrow money against your existing investment portfolio to invest in additional approved securities such as shares and managed funds. Through this borrowing you are effectively ‘leveraging’ the value of your investments.

By borrowing against your existing assets, you can take advantage of investment opportunities when they’re available. You may be able to negatively gear your investments (this is similar to negative gearing of property) by borrowing up to 70% of your existing assets.

Margin lending is suitable for those who want to increase investment assets outside of superannuation, diversify their asset base and effectively manage the cost of borrowing. You must have adequate cash or existing shares to use as security for the loan. Only certain shares can be used as a security and the amount that can be borrowed will vary for different shares.

Borrowing to invest can be a very powerful tool when put in the right hands. Benefits of margin lending include:

  • An increase in the size of your investments
  • The flexibility to diversify your portfolio
  • The potential for increased returns
  • Potential tax breaks (interest on borrowed funds is generally tax deductable provided the funds are invested in Australian assets for income-producing purposes)
  • The ability to invest at the time you want to rather than having to wait until you have saved enough money.

A word of warning: gaining a tax benefit should not be your core focus. We’ll assist you to fully understand your personal tax position.

Like any investment, margin lending involves some investment risk. Losses will be magnified due to the greater amount invested should returns become negative. Burrell will work with you to manage your margin loan, maximise the benefits and minimise potential risks, like:

  • Margin calls as a result of market volatility and/or high gearing levels
  • Interest rate increases resulting in increases in borrowing costs
  • Changes in tax laws that can impact the effectiveness of your tax deductions.

Ideally margin lending should be implemented as a long-term investment strategy to overcome any market volatility and enable the averaging effects to work.

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Contact us for an obligation-free conversation.
Call 1300 4 BURRELL for more information.