How many people borrow to buy shares?

[ratkin]

The collapse of opus prime has shown the perils of buying on margin , panic is going to sweep through the ozzie market with many who have borrowed from other firms cashing in their stocks out of fear.

As a long term investor i have never borrowed to buy shares , and am suprised at how many of the traders on the ozzie forums are doing so

Anybody know the percentages involved?

Should be some very cheap trading books showing up on trademe soon , but who will want to buy them?

[Year of the Tiger]

I guess the degree of involvment in buying and selling shares, ranges across a very wide spectrum, from the very conservative Mum's and Dad's (that's me :D) to the heavily involved Traders.

I remember back in '87 reading about people who had lost everything, (I even knew personally 2 guys who committed suicide). I knew very little about the Sharemarket then, but what I did know was that many people borrowed heavily to buy shares. The thought of even borrowing to buy bricks and mortar gave me the heebie jeebies back then. :eek:

But now to get to the point of this post after all my rambling, is that since Aug- Sept- Oct last year, there have been rumblings in the camp about what possibly lies ahead for the Sharemarket. The US Subprime issue was, for me anyway, the first concrete indication that all is not well in the land of Investment. I sat and watched proceedings until November at which time I could see more value for me in having a reduced Mortgage and sleeping easy than wondering every day whether my money was going to disappear into a big black hole. So I sold a good proportion of my shares at that time.

Since then I have sold off my next tier of shares, (those I had decided to hold through whatever happens). I now only hold shares that are speculative mining shares (of which the value isn't great), and my freebies TPW from way back.

Not once have I ever considered borrowing money to buy shares and I really can't see it ever happening. Now, I know I'm only a small fish in this big swirling pond, and I don't rely on the sharemarket for my living. I can only feel the frustration of those that do.

I feel that with the market the way it is and has been for the last few months, you would need to possess a couple of good size rugby balls if you were still in a leveraged position in the market at this stage. :confused:

(Disc. Only talking from a very low value and learning position here.)

YOTT

[Steve]

I borrowed my student loan to get a bigger kick-start in shares. Also, I tap down on the mortgage if required as it is way cheaper that using a share-margin facility through a broker.

[steve fleming]

As a long term investor i have never borrowed to buy shares , and am suprised at how many of the traders on the ozzie forums are doing so

Anybody know the percentages involved?



http://www.rba.gov.au/Statistics/Bulletin/index.html

Money and Credit Statistics (D Tables)
Margin Lending - D10 (http://www.rba.gov.au/Statistics/Bulletin/D10hist.xls)

As at Dec 07:

200,000 Margin lending accounts
$38billion borrowed in ML vs security of $93billion.

Per the ABC tonite, margin lending now accounts for 3.5% of total borrowings in Australia. About the same amount as total credit card borrowings.

[OutToLunch]

Back in the early 90s I also used my student loan to buy shares. I never did do very well, but it was a very good learning experience and it gave me the opportunity to make mistakes with just a few thousand dollars rather than make more expensive mistakes later on.

These days though, no I would not touch borrowing (for shares) with a barge pole, especially in this market which is not just falling but it is full of sharks and landmines. I prefer to sleep at night.

[AMR]

I would borrow from student loan but they closed off that loophole long ago :(

[shasta]

I sold all my shares and bought a house. Then took a line of credit mortgage against the house. I am currently deploying those funds into buying shares that pay a dividend yield over and above the cost of the interest. Any capital gains is a bonus. The mortgage is now tax deductible. There's no margin call risk, and the shares are not security for the borrowed money.

There is good debt - that used to earn money over and above its cost. And bad debt - that used to lose money. Never confuse the two :-)

Smart move KW.

I've used margin lending before, but primarily during the hype of the bull market. (I still have the ML facility, but do not use it when the market is going backwards.)

I've always run tight stops/trailing stops on any stocks i've bought on margin lending, when the DOW dived i got stopped out of the likes of PEM, AMU, & PSA close to break even. (Getting out of PEM @ $3.56 is the best illustrational of using a stop loss!)

The idea being when the markets are bullish to multiple available capital.

During times of uncertainty, i use the Cash Mgmt A/c to first "pay off the ML debt", & then accummulate funds for the next upswing.

I wouldnt recommend the use of Margin Lending A/c's, unless you have the discipline to enforce the use of stop losses, in accordance with your "system".

The high interest rates at the moment mean most ML A/c's attract 10%+ interest, making it less profitable for those looking at dividends to cover the interest.

Capital protection is still the name of the game!

[Tok3n]

Do trading shares with CFDs count as borrowing?

Thats the most leveraged I've ever been in any form of investment. I just don't like borrowing things lol.