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Also known as gearing or borrowing to invest, a margin lending facility is a line of credit that is secured against cash, shares and managed funds. Lenders do not need to know your income level, or the value of property you own. The amount lent is governed solely by the value of the cash, shares and managed funds you offer as security. Margin lending will provide you with greater access to markets than you could by using just your own funds. In addition, you can unlock equity in existing investments for use as loan security, raise cash for other investments without having to sell assets and it can also help you diversify a portfolio.
Gearing investments gives you the potential to create wealth more quickly by having more money work for you. Similar to income from an investment property, your investment income can help you repay the loan and potentially generate capital growth as well. As an added benefit, the interest on the loan may be tax deductible.
A margin loan may not suit every investor and potential investors should understand the risks involved when considering gearing. It is important to be aware that while margin lending has the potential to magnify capital gains, it also has the potential to magnify capital losses.
If you are uncertain about margin loans, geared managed funds are an alternative to margin loans. The gearing occurs at the fund level so the fund manager borrows in the name of the fund so investors are not at risk of margin calls and interest is generally paid out of the fund's earnings. However just as a margin loan can magnify losses, a geared managed fund also increase the risk of loss.
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| St George Margin Lending | Access a St George margin loan with a special 0.4% discount interest rate. more info
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| Financial Advice | Professional fee for service financial advice - avoid % based adviser service fees that last the life of the investment. more info
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