Gearing explained

Gearing is borrowing money for the purpose of investing. By adding borrowed funds to your own, you can increase your total amount available for investment. Australians have historically geared into property via a mortgage. Investors can also gear into the sharemarket as a way of having more funds to invest.

Understanding gearing

Benefits of gearing

  • Increases the funds you have available to invest
  • Allows for a larger investment portfolio, so you can start investing sooner rather than later
  • Offers diversification across a range of investments through a wide selection of acceptable investments
  • Provides flexibility, allowing you to choose the degree of gearing that meets your investment objectives
  • Gearing can potentially be tax efficient, depending on individual circumstances

Gearing through a margin loan

One form of gearing is margin lending. A margin loan is a line of credit that allows you to borrow money to invest. You can leverage an existing portfolio or create a new investment portfolio to help meet your financial goals.