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BORROWING & GEARING, Discussion of Pros & Cons
pengo
post Posted: Mar 30 2005, 02:44 PM
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In reply to: pengo on Wednesday 30/03/05 02:24pm

QUOTE
And if I want to have a buffer of 10% I can then only borrow $57k against the stock that has a LVR of 75?


Further the above statement, would this put me at 95% utilisation of my margin loan? If so will this give me 10% breathing room so that if the stock falls 7% (exceeding the margin lenders 5% buffer) I wouldn't get a margin call? Or am I not understanding how this all works?

thanks again.

 
pengo
post Posted: Mar 30 2005, 02:24 PM
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QUOTE (rozella @ Friday 11/03/05 11:59am)

hey all,

i'm seriously considering getting a margin loan for a long term portfolio and use the interest to help offset my income tax. Before I take the leap I'm reading up about it so I can to the best of my ability understand this before jumping in with the sharks. So I've had a read threw this thread and have a couple of questions.

Looking on the various margin lending websites, they list approved stocks you can invest in.

The thing that has me confused is rozella states the credit is based on the whole portfolio, but the margin lenders state a leverage (LVR) on individual stocks that vary. So if I get a loan for $80k and an security has a LVR of 75, I can only invest $60k of the margin loan? And if I want to have a buffer of 10% I can then only borrow $57k against the stock that has a LVR of 75? Is this right?

And lastly how can I calculate if a particular stock will get a margin call? If their buffer is 5% and I've utilised 95% of the margin loan, does the stock have to drop 10% in value for a margin call?


Well I hoped I made sense and someone can address my questions tongue.gif

 
rozella
post Posted: Mar 11 2005, 11:59 AM
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In reply to: onefineday on Friday 11/03/05 12:39pm

Your credit is based on the whole portfolio that is with the marginlender not on each stock, then most lender have a 5% or 10% buffer as well. Under normal trading conditions it is unlikely that all stocks would drop at the same time.

I have a marginlending portfolio on a website that you can follow.

exdividendwatchlist

Go to Margin Trading 2 which is up-to-date as at 4th March......I update it on the website each Friday or Saturday morning.

rozella

 
onefineday
post Posted: Mar 11 2005, 11:39 AM
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Hi
Can someone please explain to me how a margin loan works with multiple securities.

I understand the concept with a single stock portfolio but how do you calculate your portfolio LVR based on multiple LVR's ?

Say you have 2 shares , one goes up the other goes down.
The one that's gone down has technically caused an LVR (gearing) breach on an individual basis , but your other stock has gone up.Does your margin lender offset the 2 positions ?
And if so how ?
Or do they classify all your loans as individual loans ?

I don't understand this concept and how it works , would appreciate it if someone could explain this to me.

Thanks




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The market can stay irrational longer than you can stay solvent.
 
normc
post Posted: Jan 22 2005, 05:17 PM
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In reply to: mick65 on Saturday 22/01/05 12:00pm

Few (probably no) lenders will give you a margin loan on spec stocks. They all produce a list of stocks they will lend against, so you can check your target stocks against these if you wish.

Because you cannot use the stocks as security, you may need something else. Up to you, but I wouldn't mortgage the house for spec stocks.

If you havn't done so, read right through this thread. Some terrific posts, particularly by Badfish, but others also.

 
Avenger
post Posted: Jan 22 2005, 05:01 PM
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In reply to: mick65 on Saturday 22/01/05 12:00pm

Hi Mick

You can claim interest deductions. Don't forget you can make capital gains which are taxable. This is also income. Therefore, you are entitled to claim the interest.
Besides, you could always argue that dividends will flow in the future.

When talking about which type of loans to use, I look for flexibilty and cost. The highest tax rate is 50%. Therefore the maximum amount you will get back is 50c in the dollar. You are still out of pocket 50%. Therefore, the lower the interest, the better off you are.

Regards


Avenger

 


mick65
post Posted: Jan 22 2005, 12:00 PM
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Just reading the boards and was wondering if someone could tell me -

1) Can you claim interest if you are investing in spec shares or does the taxation office say because no dividends (income) are likely than your investment is not 'deemed to be producing an income'.

2) Is an equity loan better for specs because of their fluctuations than a margin loan.

Any thoughts cheers.

Mick65

P.S. I invest in specs but with own money, but was wondering if I wanted to increase my portfolio if I could claim interest. Some people have told me no and some yes. Any thoughts? Cheers.




 
rozella
post Posted: Jan 22 2005, 07:26 AM
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For those who trade CFD's.......here is another one.....I received a letter from them earlier in the week. I did not see them mentioned here.

Manfinancial

rozella

 
normc
post Posted: Jan 21 2005, 10:15 PM
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Badfish,

Just had to drop you a note of thanks. I'm heavily invested in the share market through my SMSF, but have never used ML. Thought I'd learn about it a bit (not for the SMSF of course), but need to increase my non super earnings so I can stay 'retired' untill I really retire and draw on super. Looked at the web sites for a number of lenders, then read the Borrowing and Gearing Thread on SS. This thread had heaps more info, written in a way a dummy like me can understand, than all the lenders put together.

Don't want to piss in your pockets too much, but your posts on this thread are terrific. If you have the time and interest, get yourself a job as a training officer with one of the lenders!

Thanks, mate. Don't know if I'll get into ML, but I now understand it a lot better.

 
Bloodwynch
post Posted: Dec 14 2004, 10:41 AM
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Posts: 517


In reply to: happy2 on Saturday 11/12/04 12:26am

QUOTE
Every business transaction is the same. If you pay to borrow money to make money, it is tax deductibe, CFDs included.

This is from the ATO website.
"If you borrowed money to buy shares, you will be able to claim a deduction for the interest incurred on the loan, provided it is reasonable to expect that assessable dividends will be derived from your investment in the shares. Where the loan was also used for private purposes, you will be able to claim only interest incurred on that part of the loan used to acquire the shares."

http://www.ato.gov.au/individuals/content.....htm&page=8#H34

 
 


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