Margin Lending

[barleeni]

I had a peruse but haven't seen any threads, or much discussion about margin lending. Is this popular? and does anyone on ST use margin lending on a regular basis?

ASB Securities offers it, and I was just wondering if anyone had any advice or experience on using it???

Does anyone know what the lending rate is at present on ASB Securities?

Thanks in advance for any feedback!

[noodles]

I had a peruse but haven't seen any threads, or much discussion about margin lending. Is this popular? and does anyone on ST use margin lending on a regular basis?

ASB Securities offers it, and I was just wondering if anyone had any advice or experience on using it???

Does anyone know what the lending rate is at present on ASB Securities?

Thanks in advance for any feedback!
I have investigated margin lending at ASB and through http://www.leveragedequities.co.nz/ (via First NZ)
In both cases the list of available stocks often do not cover the same stocks I own and the margins are quite conservative. Average around 50-60%
When I rang ASB a couple of years ago, the rate was about the same as a variable rate mortgage. But it only takes 2 mins to call them and get the latest rates.
If you have equity in your home, you could consider structuring the mortgage so you use that to borrow against. That way you effectively get 100% margin and can choose any stocks you want.

Of course, margin lending is a fancy way of saying that you are leveraging and taking on more risk. Only for seasoned operators (especially if you are use your house to leverage). A market correction/crash could wipe out all your assets as the bank would make a margin call. Scary stuff!

If your stock selection is reflected in the threads you post on (NZO, CRP, NZR, Bathhurst), you would be leveraging up already high risk stocks. That is a recipe for disaster.

Be careful out there.

[barleeni]

Thanks Noodles, it does seem a high risk venture. I guess by the time you account for the fee's associated and the margin rate, you would need be thinking along the lines of cost of finance being circa 10%...... which is a big call to make.

You'd have to be super confident with your decision making on what to invest in... it would have to be a 'sure thing' and we all know what happens to 'sure things' I certainly do, my first ever share purchase was CNU at $2.63 about 5 days before ''that'' announcement!

You are correct on my holdings, I started off high risk but certainly learnt my lesson and am currently favouring more stable holdings, my biggest 2 are AIR and NZR both buying in at sub $2 (although I still hold all that you mention). I am looking for something low risk at present but im finding it hard as a lot of those stable, dividend yield stocks seem fully priced if not overpriced at present??

[fish]

I use asb and have a mortgage on the house used solely for margin lending-just renewed at 5.3% and the direct margin lending I have I think is 6.2%.
Genesis is one of my biggest investments and their payout is around 9%.-counting imp.credits.

Cost of both sources of finance is tax deductible.
Have done it for close to 10 years and every year I receive more in dividends than cost finance.
Hold it in a joint account and my wifes imp credits are more than she can use so building up to a large amount.
If finance rates don't rise for several years and power companies increase dividends as forcasted this will be a winning strategy.
I don't believe power companies are overpriced.
It is risky but for my financial situation I believe the risks are outweighed by the profits-and it will be my superannuation.