Margin Lending Through Leveraged

What is a margin loan?

A margin loan uses approved shares, managed funds and cash that you own in your portfolio as security for a loan that allows you to buy more shares or managed funds. This investment strategy, known as leveraging or gearing, is the same concept as borrowing money to invest in property, except that the underlying collateral is shares rather than real estate. Margin lending has long been used by investors. By using borrowed funds to invest, your exposure to shares, Exchange Traded Funds or managed funds increases; thus potentially accelerating your returns.

How much can I borrow?

Each margin lender maintains a list of securities that they are willing to lend against, and a Loan to Value Ratio (LVR) for each stock specifying the percentage of the value of the stock they will allow you to borrow. For example, you may be able to borrow 75% against a large blue chip stock like BHP but only 40% on a smaller speculative stock. Overall, the quality of the assets you hold in your margin loan determines the potential maximum amount of your loan.

What are the advantages?

Apart from the obvious advantage of being able to make a larger investment than if you were to purchase the shares debt free, you may be able to take advantage of tax concessions on the interest payments you make on the margin loan.

In Australia you may be able to claim expenses incurred, such as interest on loans, during the process of generating income. This can be an attractive part of a bigger strategy for investors. Please consult a tax professional for more information, as this may not apply to your particular circumstances.

What are the risks?

While leveraging can offer you greater exposure to the share market and may offer you a greater return when the price of your stocks go up, it may also expose you to greater losses when your stock prices go down. Most margin lenders will require you to maintain the LVRs on your borrowing, which may be adversely affected by falling markets or the margin lender changing the LVRs.

In addition, like any loan, it is subject to changes in interest rates. The interest repayments on the loan may impact any potential profits you make from share trading on your margin lending account. Obviously you should assess your abilty to service the loan before using such a facility.

Why did amscot choose Leveraged?

Founded in 1991 and acquired by Adelaide Bank in 2000, Leveraged Equities is one of the first and longest continually operating margin lending specialists in Australia.

We are pleased to be able to offer an award-winning margin lending solution through the Bendigo and Adelaide Bank subsidiary Leveraged, which has been crowned number one in its sector for overall customer satisfaction. With a Leveraged Equities Margin Loan linked to your amscot Stockbroking account, you can easily trade shares and gear your investment portfolio.

As the professional’s choice, Leveraged offers innovative geared investment solutions and exceptional customer service. Their service is designed to help customers navigate through dynamic market conditions and realise their financial goals.

Leveraged’s extensive market experience means you can enjoy the confidence that comes from the superior education and insights their team provides. You can expect a premium service from Leveraged with private-banking style account management supported by proven risk management expertise.

amscot has a dedicated data feed with Leveraged, which allows clients to see their portfolio and loan balances on amscot's trading platform. Any trades executed on your Leveraged Equities Margin Loan account through amscot will automatically be sent to Leveraged at the end of each trading day. What this means for Leveraged clients at amscot is hassle-free trading online and no hold ups waiting for orders to be approved.

The Leveraged Equities Margin Loan is issued by Leveraged Equities Limited (ABN 26 051 629 282 AFSL 360118) as Lender and as a subsidiary of Bendigo and Adelaide Bank Limited (ABN 11 068 049 178 AFSL 237879).

This information is general in nature and doesn't take into account your personal objectives, financial situation, or needs. Please consider your personal circumstances, consult a professional investment provider, and read the PDS and Product Guide, available to download from www.leveraged.com.au before making an investment decision.