What is it?
Margin Lending is where you use existing assets (eg cash and/or equities) as security to borrow additional funds to invest.

Suitable for:

• Long-term investors (more than 5 years)
• Tolerance for volatile investment returns
• On Higher Margin Tax Rates

Advantages

• Exposure to market linked investments which have the potential for greater returns over the long-term.
• Positive returns will be magnified given that you have borrowed funds invested.
• You may be eligible for Tax deductions on the interest repayments

Disadvantages

• The exposure to market linked investment may result in greater volatility of investment returns, especially over the short-term
• If your investment portfolio falls below a threshold (usually 70-75%) of the loan amount, then you may have a "margin call". Whereby, you would need to reduce the investment portfolio in relation to the borrowed amount. This may need to be done within 24 to 54 hours, depending on provider;
• Negative returns will be magnified given that you have borrowed funds invested.
• Given the greater volatility, then you may need a longer time horizon to ensure returns.