Margin Loans

Perhaps a silly question... however are share investors here using margin loans??

 

Yes I use it. Only buy broad market index ETFs offering the highest LVR. Usually around 75%-80% LVR

Risky I know but I manage risks by keeping LVRs in the 30% percent and cash buffer.

Interest rates around 3.5%-3.70%

Cheers
Oracle

 

Surprised about the interest rate, would have thought much higher

Do you mind sharing who this is with??

 

Yes and would love to continue doing so but had to close it down years ago to service a home loan. Damn APRA.

 

No margin. But I have my PPOR loan sitting in offset that I have been contemplating to use for increasing index fund purchases. At 2.79% interest it makes sense to use it. Even though the numbers make sense I have been reluctant to do it. Though I have committed to start dabbling with using leverage to invest in this next week. Once I get comfortable with the idea I will increase the amount.

Would be silly not to take advantage of such historically cheap rates for at least the next few years.

 

No. I don’t use them. They can multiply your profits or losses.

 

I use leverage for Forex markets. Hold large positions but cut losses extremely fast. Sometimes within a few minutes. Let my winners run and leverage takes care of the rest.

 

not me ( so far )

but an experienced trader buddy does

i MIGHT consider a margin loan , IF i thought the market was near the cycle bottom , and the economy had better fundamentals , although i have explored the possibility of ( self-funding ) warrants as well , i would probably try to increase holdings in the same companies with either strategy .

at the moment i have plenty of complexity in my portfolio ( a very diverse portfolio ) i would have to see a very attractive reason to expand that complexity given i am currently sitting on 4% cash ( not short term financial securities ) , if i can't place that sensibly why would i take on extra obligations

 

I used to work for the margin lending division of an investment bank, so naturally I had a margin loan for many years. It was quite an efficient line of credit against shares I owned and was a good way to have funding, not necessarily for shares.

 

ANZ

You need to negotiate and be lucky

Cheers
Oracle

 

Sort of..
Using NAB Equity builder, it works more like a mortgage over shares though with no margin calls. Very limited selection of low volatility listings - ie ETFs, LICs and a few others. As far as I know NAB is the only one that has this type of product.
Only just started earlier this year because it had a 3 month application process due to backlog of apps.
3.75% and LVRs of my chosen funds are 70-75%, LICs are similar.

 

I've had margin loans active for 26 years, closed my Australian one a few years ago because of the high interest rate, now I just use Interactive Brokers in Ireland with an interest rate averaging 2.3% for GBP (tiered). They shifted out of the UK because of brexit. Over 80K the rate is about 1.9%.

Interactive Brokers are great, their brokerage rates are also very low, it's much cheaper for me to write options on Australian stocks than to use my Australian broker for them (but i do both because of the collateral involved).

 

Cba will do similar for loans over 500k.
Basically you should expect to pay about 1% more for the equivalent loan amount over residential security (IO investment rates obviously)

 

The only thing is LVR offered by ANZ on stocks/ETFs I like is better with ANZ compared to CBA.

During crunch time I think having that extra 5-10% buffer can be difference between margin call or not.

Cheers
Oracle.

 

Good consideration.

 

Bell Direct are doing 3.9% margin loan with 12mth interest paid in advance.

Any one here using them?

 

No, much better fixed rate (advance) depending on loan amount btw

 

I use NAB Equity Builder

 

Hi Oracle thanks for sharing this info. I'm also with ANZ but im currently getting a slightly higher than 3.9%. Do you mind to PM in how you're getting the lower rate? cheers.

 

As mentioned above its about negotiating hard. Part of that process involved talking with multiple margin lending providers to find who is most keen to have your business. I have walked away from ANZ to another provider and then ANZ contacted me few months later to have me back and offered a rate I couldn't resist.

Lastly, you need to have descent size loan amount they will not entertain giving large discounts for few thousand dollar margin loan.

Hope that helps.

Cheers,
Oracle.