Investing Noob - Margin Lending?

Discussion in 'Investment Strategy' started by Medusa, 15th Mar, 2020.

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  1. Medusa

    Medusa Well-Known Member

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    Hi all,

    I'm looking to take advantage of this downturn, and start passively investing in shares for retirement but unsure if that will hinder my property investing strategy. I have 3 questions if you guy's could help me with.

    1.) I currently have over 100K in an offset account of my PPOR and thinking of using 10 - 20K to start diversifying into a share portfolio, which I will slowly add 200$ every month for the next 30 yrs or so. Once that is set up, can I utilise my shares as security for a deposit for my next house? I would like to continue investing in the property market buying many more houses in the future but I don't want to hinder my next deposit by taking money out of my Offset acc and into shares if I can't utilise it? I've read up on Margin Lending against my shares, but most information about Margin lending is to borrow against property to buy shares.

    2.) What kind of shares, I'm leaning toward a Vanguard Index with say 50% local 50% US with top 50 or 100 Aussie and US companies but not sure which ones - any recommendations?

    3.) Do all Vanguard shares pay dividends and am I able to reinvest the dividends automatically? Also what is the tax implications with doing this, when I am a normal property investor. Saving for deposits, maximising deductible debt and paying off PPOR.

    Cheers :)
     
    Medusa, 15th Mar, 2020
    #1
  2. Sackie

    Sackie Well-Known Member

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    I'd be very careful using leverage in stocks as a newbie.
     
    Sackie, 15th Mar, 2020
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  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    A broker is in a better position to answer, but I'm pretty sure you share portfolio will not be considered as security for a loan. Perhaps some of the income would help with serviceability though.

    Borrowing against property to buy shares is not margin lending. Margin lending is where the security for the loan is the shares themselves.

    Reinvesting dividends means that you still need to pay tax on the income - but you don't get the cashflow because it has been converted to more shares. That's not a problem if you can manage the tax obligations from other income sources or capital.
     
    Simon Hampel, 15th Mar, 2020
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  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Shares can be used as security for margin loans with the money used for property. This would need to be arranged by the private banker types and is generally only possible with large holdings.
     
    Terry_w, 15th Mar, 2020
    #4