Margin Lending

How should I set up my margin lending account to protect against losses while the markets are so volatile?

Question: How should I set up my margin lending account to protect against losses while the markets are so volatile? Response: It is important to maintain a well diversified portfolio to weather any falls in the market , most importantly, the portfolio needs to be also diversified against different sectors in the market. This is…

Can I remove the initial cash or sell the shares and still have the margin loan sitting there?

Question: Can anyone answer my question regarding the initial cash or shares required as security for the establishment of a margin loan: Once the loan is established and becomes like a flexible line of credit, can I remove the initial cash or sell the initial share security and still have the margin loan sitting there?…

Can I use a margin loan to buy just one stock?

A Margin Loan can be utilised to purchase just one stock. However, before considering in investing in just one stock, you will need to consider how much you wish to borrow. In the case of the top 20 shares listed on the ASX, we lend up to 65% of the current value of these shares,…

When is my portfolio at risk of falling into margin call territory?

Question: What is a margin call, and how can I calculate when my portfolio is at risk of falling into margin call territory?   Response: Any portfolio that is highly geared is at risk of falling into margin call territory. This can be calculated if your current LSR (loan-security-ratio) is approaching your base LSR. If…

Can anyone take out a margin loan, or do you need assets?

A margin loan allows you to borrow money, giving you a wider range of investment opportunities and increases your potential returns. It allows investors the opportunity to combine their existing equity with borrowed money to expand their portfolio into shares and managed funds.   The three main forms of security used on a margin loan…

Can the interest on my margin loan be covered by dividends on shares?

Question: Do I have to come up with the interest payments on a margin loan or could it be covered by the dividends I receive on the stocks? Can you give me an example please. Response: While there is no obligation to pay interest on your margin loan, assuming the loan doesn’t go into margin…

What is the loan to value ratio of a share?

Question: What is the loan to value ratio of a share, and how does this change as the share price changes? Response: A loan to value ratio or Lending Value Ratio (LVR) is a percentage measurement of the amount that can be borrowed against a share or a managed fund, using a margin loan. For…

How do margin calls work?

A Margin Loan is a loan that uses shares or managed funds as security. You can start with existing investments or cash contribution, then borrow to expand your portfolio. Your portfolio is security for your loan, much the same as a house is security for an investment home loan. Margin Calls occur when your equity…

What happens if the stock that I have margin lent against falls off the approved list?

CommSec Margin Lending actively reviews all approved stocks and funds on regular basis, and from time-to-time may reduce or remove the Loan to Value Ratio (LVR) on particular stocks. If this does occur to you and your Loan to Security Ratio (LSR) increases to a level higher than your margin call LSR, then a margin…

What is a margin loan?

A margin loan is a loan that uses shares or managed fund units as security. You start with an existing investment or cash contributions, then borrow to expand your portfolio. Your portfolio is security for your loan, just as a house is security for a home loan. For example: if you own $3000 worth of…

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