FAQ

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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,…

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 are:…

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…

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 does it mean to be positively or negatively geared with margin lending?

What does it mean to be positively or negatively geared with margin lending, and what circumstances would you use each? Response: An investor has a positively geared margin loan when the dividends payments exceed the interest costs. In such a case the income stream from the investment is (more than) self-funding. If the investor is…

Fixed or variable margin loan?

I’m not sure whether I should take out a fixed or variable rate margin loan. What are the advantages and disadvantages of each, and what type of investor do they suit? Your choice of interest rate on a margin loan (variable or fixed) depends on your financial and tax circumstances, your opinion as to the…