Explore The Connection Between Investing & Margin Finance
Explore The Connection Between Investing & Margin Finance

Margin lending is the act of borrowing funds to invest in shares and various financial products, with existing investments serving as collateral. This sets it apart from conventional investment loans, providing a distinct approach to financing investment endeavors. Here, we'll explore the ins and outs of margin lending services in Dubbo NSW, addressing how much you can borrow, the benefits, and the associated risks.
Understanding Margin Lending:
Margin lending is a financial strategy that involves borrowing funds to invest in shares and other financial products. What sets it apart from traditional investment loans is the use of existing investments as collateral. This means that the value of the shares being purchased or already owned serves as security for the margin loan.
How Much Can You Borrow?
Margin lenders determine the lending value of shares and the percentage of the share value that can be used as security. It is called the LVR, which is the Loan-to-Value Ratio. For instance, if a Blue Chip company has an LVR of 70% and you aim to invest $10,000 in shares, the lender will provide $7,000 (70%), and you'll need to contribute the remaining $3,000 in cash or other shares.
LVRs are typically capped at a maximum of 70%, potentially lower for riskier or more speculative stocks. The difference between the loan value and the current value of your stocks is termed the "margin," which must be maintained at a minimum level.
Benefits of Margin Lending:
Wealth Building: Margin lending can augment your long-term wealth by expanding the size and diversity of your investment portfolio. Diversification, in turn, helps mitigate risk in the market.
Timely Investing: Borrowing allows you to seize investment opportunities when they arise, rather than waiting until you've accumulated sufficient savings.
Tax Deductibility: In Australia, the interest on borrowed funds is generally tax-deductible when invested in income-producing Australian assets. However, it's crucial to consult a registered tax agent for personalized advice.






