ASB Margin Lending - Withdraw Cash/Equity

[Stylerz]

Hi,

I was wondering if anybody has experience with ASB Margin Lending,and if it possible
to use it similar to a revolving credit facility?

For example, building up a portfolio in a margin account and having leverage within the required ratio. Then paying down the leverage/loan
through regular dividends and income, and after time transferring cash out of the margin account to fund other investments/expenses?
(obviously staying within the required margin ratios).


Is this possible to do this? As it would be potentially be a good strategy to free up cash/equity from current holdings without having to sell them.
Or is it only possible to use the margin to make additional share purchases?


Thanks in advance,


Styerz

[Aaron]

To be honest I have not tried but there is a balance in the cash management account you can transfer to other ASB accounts and spend on whatever you like as far as I am aware. ASB Securities holds your shares as security for the loan so can sell as soon as you breach your margin which can disappear quite quickly in a crash as I found out in 2007-2009.

To find an investment that yields more than what you pay in interest would be quite a feat in this day and age. Actually I take that back 6% on your loan.

I would have thought you would have to be pretty confident in your investing ability to do that. Isn't one of the investing maxims "never borrow to buy shares".

[Stylerz]

Thanks for your reply Aaron. You make some great points.

The reason I am researching this strategy, is that holding the likes of AIA, SUM and VHP for 10plus years now, my equity gain is high, but dividend yield on current value is low. I do wish to hold these shares for a further 20plus years, and am contemplating if the margin lending is way of releasing capital periodically instead of selling any shares.

I do understand there is risk involved. If I proceeded the loan to equity ratio would be very low to avoid margin calls. I'm am also of the opinion some calculated risk is a good idea to work towards one's individual goals.

Worth noting too, the interest is tax deductible if capital is used to purchase an income producing asset. Effectively giving a considerably lower interest rate.

[JBmurc]

Just got another 70k available on floating credit @ 5% with Westpac .. what does ASB charge?