1. Property (generally) don't go down to the level of say OneTel!
2. Property is very forgiving largely thanks to inflation and forced saving.
3. Less margin calls so less riskier if you can service.
learning about shares.
- Thread starter rugrat
- Start date
2. Property is very forgiving largely thanks to inflation and forced saving.
3. Less margin calls so less riskier if you can service.
I agree that severity of this consequence would be high.
What is the likelihood of that happening? Even if it drops by 20%, what is the likelihood of getting a call from a bank?
In same order as yours
1. Hence the properly educated shares strategy. Would have never picked that up to begin with
2. Same for either class
3. Hence the properly educated shares strategy. Wouldn't have that kinda LVR where a margin call was possible
Maybe study up on how a margin call works,well before the 20% drop you will get a phone-call,and the bank is holding all the cards no-in-betweens ,and 20% is nothing most high end banks went over 50% free fall and if one were to read the posts in that period one saw many people that lost everything..then the tear-drop explodes..
I'm looking at diversifying myself in shares.Something i'm looking atm.Maybe a spread of 33% with buffer in hand to hedge your bets?Still on L plates re:shares.
Most traders monitor their win/loss ratio don't they, no one ever wins all the time
Speaking of which, my Navra Losses have finally all been absorbed by Capital Gains as at last FY
There are plenty of ways to leverage in the share market and never ever face a margin calleven if stock drop 90%
Do Tell ROE
Draw equity out of your house or properties, pay standard mortgage rate and invest in shares
no margin call ever as long as you can meet repayment.
interest are deductible just like margin loan but maybe 3-4% cheaper.
Dont know why people bother with margin loan, it is expensive unless you are a very skill investors or can time the bull market ...you probably be worse off.
This is more of options margin requirement, to write options you need to meet a certain margin either via cash or shares and it usually a fraction of the total
value of the contracts, you get hit up for more if the value of the contracts deviate too far from your margin requirement.
Share on margin is like leverage in properties, say you have got 100K worth of shares and you want to borrow more against the portfolio to buy more shares
and say they allow margin of 70% you can borrow another 70K more and use 100K as collateral ...if your portillo tanks to below the 70% mark they hit you up for more cash to bring it to 70% or more and if you can't meet in 24 hours, they start dumping your
shares at market price and recover their capital...you could be wipe out and they don't care, that why when share market crash margin call will make it worse, as all the lenders start dumping shares but there isn't many buyer and it get cheaper and cheaper and cheaper
but if you have cash, you spoiled with choices with bargain basement price.
price will recovered when most margin call are done ... because when they dump shares
it fast and furious, lenders just want their money, whatever the bid price they off load them.
you gave them all this right when you sign up for margin loan.
I don't use margin, I wait for other people to get margin call then I come in and it happens every 10-15 years
I have had a small margin loan over the past five or six years. I have neglected doing much with it but it is still doing well. The interest is fully tax deductible. The ANZ shares I bought with it at around $23 are now worth $34. And I have received dividends and franking credits from them valued at about 3-4% net per year. The interest rate on the loan has been shrinking as interest rates have reduced over this time.
So I dont think that you necessarily have to be actively trading to benefit from a margin loan.
To max out the risk and put it all on the line,
1. draw equity out and buy shares.
2. Use these shares as collateral on a margin loan to buy more shares.
Has anyone tried this double gearing? If the market tanks, you lose your house quickly and go bankrupt. But if things go well, you can retire quickly.
That is what I was doing few years ago without really understanding the risks. Someone from this forum pointed out the danger... and pulled out. I needed a deposit so that helped the decision too.
I'm not talking about trading I'm talking about investing.
"If a tree falls in a forest and no one is around to hear it, does it make a sound?"
or
"If your share or property portfolio equity becomes negative and you don't sell, have you really made a loss?"
For the record, I'm more long term across the board nowadays
I understand Redwings point on this issue. I raised it several years ago.
If you use margin loan, you basically have to think partly like a trader.
Why?
because you cant afford the shares to drop by too much otherwise you risk a margin call, and if you cant meet that call your shares are sold.
No point shares rising afterwards when you have been force sold out.
I think this is the point Redwing was trying to make.
In regards to the above point I try to mitigate by
(a) not having too greater exposure to any single share. My 'comfortable preference on an individual share is 2-2.5%, the portfolio cannot have more than 10% in any one share, otherwise I start selling
(b) the overall portfolio cannot have an LVR greater than 60%. (even though I can hit a ratio higher than this). 60% is automatic sell down, no questions asked.
To protect on (b) I start to sell at 55%, and to further protect when the leverage is greater than 50% I look at individual positions and start trying to cut.
(c) (b) does not include the MINIMUM 5% cash buffer I always try to maintain (eg) $1 million in margin loan, means there is $50k sitting in a cash management account. I get whacked for differential interest (difference between lending rate and borrowing rate) on this but I don't care. This forms part of risk mitigation
(a) not having too greater exposure to any single share. My 'comfortable preference on an individual share is 2-2.5%, the portfolio cannot have more than 10% in any one share, otherwise I start selling
(b) the overall portfolio cannot have an LVR greater than 60%. (even though I can hit a ratio higher than this). 60% is automatic sell down, no questions asked.
To protect on (b) I start to sell at 55%, and to further protect when the leverage is greater than 50% I look at individual positions and start trying to cut.
(c) (b) does not include the MINIMUM 5% cash buffer I always try to maintain (eg) $1 million in margin loan, means there is $50k sitting in a cash management account. I get whacked for differential interest (difference between lending rate and borrowing rate) on this but I don't care. This forms part of risk mitigation
