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Margin loan case study

1 June 2016 |Case study
Learn how unlocking the value of your investment portfolio using a margin loan can help build wealth and achieve your financial goals on a chart background.

Margin loan case study

1 June 2016 |Case study

A margin loan allows you to borrow money, in addition to your own, to invest in a wide variety of acceptable investments, including shares, exchange traded funds, listed investment companies, and managed funds.

By borrowing to invest (also called gearing) you can build an investment portfolio larger than you would by using only your own funds.

Gearing vs no gearing

  With a Margin Loan Without a Margin Loan
Your funds $20,000 $20,000
Loan $40,000 $0
amount invested $60,000 $20,000

Positive impact: Price increases

If the price of your investments increases by 10%, the impact would be a 30% positive change on your portfolio.

  With a Margin Loan Without a Margin Loan
Market value of investments $66,000 $22,000
Your remaining capital after loan repayment $26,000 $22,000
Gain/Profit $6,000 $2,000
Gain as a percentage of funds you invested 30% 10%

Negative impact: Price decreases

If the price of your investments decreases by 10%, the impact would be a 30% negative change on your portfolio.

  With a Margin Loan Without a Margin Loan
Market value of investments $54,000 $18,000
Your remaining capital after loan repayment $14,000 $18,000
Loss -$6,000 -$2,000
Loss as a percentage of funds you invested -30% -10%

Gearing magnifies your gains and losses. If you are interested in putting in place an investment strategy to help build your wealth, we can help. Our service is designed to help investors navigate through dynamic market conditions and realise their financial goals.

This information is correct as at 1 June 2016.

Gearing involves risk. It can magnify your returns; however, it may also magnify your losses. 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). Information is general advice only and does not take into account your personal objectives, financial situation or needs. The views of the author may not represent the views of the broader Bendigo and Adelaide Bank Group of companies (“the Group”). This information must not be relied upon as a substitute for financial planning, legal, tax or other professional advice. You should consider whether or not the product is appropriate for you, read the relevant PDS and product guide available at www.leveraged.com.au, and consider seeking professional investment advice. Not suitable for a self-managed superannuation fund.

Examples are for illustration only and are not intended as recommendations and may not reflect actual outcomes. Past performance is not an indication of future performance. The information provided in this document has not been verified and may be subject to change. It is given in good faith and has been derived from sources believed to be accurate. Accordingly no representation or warranty, express or implied is made as to the fairness, accuracy, completeness or correction of the information and opinions contained in this article. To the maximum extent permitted by law, no entity in the Group, its agents or officers shall be liable for any loss or damage arising from the reliance upon, or use of the information contained in this article.

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