What are the risks of borrowing to invest in the share market?
It is essential that the concept of gearing or leverage is understood. In deciding to borrow to invest, you need to appreciate that while gearing can increase returns through capital growth and greater dividends, it can also have a similar negative impact when markets fall. A dollar for dollar draw down strategy (as described above) represents a 50% gearing ratio. A gearing ratio not exceeding 50% is available on both the Initial Contribution and the Monthly Instalment Contribution. If the amount of your Initial Contribution is the minimum amount of $5,000 and the amount of your Monthly Instalment Contribution is the minimum amount of $500, your gearing ratio will be 50% at the time each amount is invested. You should be aware that the higher the gearing ratio, the greater the risk of margin calls and of capital loss. (See below for a description of margin calls). The suitability of gearing in your particular circumstances is a decision that should be made in consultation with your adv
It is essential that the concept of gearing or leverage is understood. In deciding to borrow to invest, you need to appreciate that while gearing can increase returns through capital growth and greater dividends, it can also have a similar negative impact when markets fall. A dollar for dollar draw down strategy (as described above) represents a 50% gearing ratio. A gearing ratio not exceeding 50% is available on both the Initial Contribution and the Monthly Instalment Contribution. If the amount of your Initial Contribution is the minimum amount of $2,500 and the amount of your Monthly Instalment Contribution is the minimum amount of $250, your gearing ratio will be 50% at the time each amount is invested. You should be aware that the higher the gearing ratio, the greater the risk of margin calls and of capital loss. (See below for a description of margin calls). The suitability of gearing in your particular circumstances is a decision that should be made in consultation with your adv
It is essential that the concept of gearing or leverage is understood. In deciding to borrow to invest, you need to appreciate that while gearing can increase returns through capital growth and greater dividends, it can also have a similar negative impact when markets fall. A dollar for dollar draw down strategy represents a 50% gearing ratio. A gearing ratio not exceeding 50% is available on both the Initial Contribution and the Monthly Instalment Contribution. If the amount of your Initial Contribution is the minimum amount of $5,000 and the amount of your Monthly Instalment Contribution is the minimum amount of $500, your gearing ratio will be 50% at the time each amount is invested. You should be aware that the higher the gearing ratio, the greater the risk of margin calls and of capital loss. The suitability of gearing in your particular circumstances is a decision that should be made in consultation with your adviser. At a gearing level of 50%, a move in the underlying value of t
