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  1. #11
    Advanced Member Entrep's Avatar
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    Thank you everyone, appreciate the responses and you all taking the time to do so.

    I'm also speaking with my accountant and other advisors about this.

    Cheers

  2. #12
    FEAR n GREED JBmurc's Avatar
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    Quote Originally Posted by Entrep View Post
    If you have plenty of equity and are comfortable paying the debt, even without dividends, would you ever consider adding to your mortgage in times like these, to truly take advantage? The dividends would more or less cover the interest if you choose wisely and the interest would also be deductible against the dividends, I imagine.

    Anyone considering this or done it before and have some tips?
    I have for many many years have a company loan I use for trading and investing in the market(Using property equity to secure low rates 3.8% currently) ..I wish like many I had paid it off couple months back and be in a position to redraw the funding with all of my companies I've invested in down hard last few weeks and be buying in over the nest few weeks of Maximum FEAR induced selling ...

    did sell down companies I believe will do worse over the near term and purchased another ASX AUD Gold play well cashed up with a plant and Gold reserves in place for 50% less than it was trading at weeks ago
    Last edited by JBmurc; 23-03-2020 at 07:14 PM.
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

  3. #13
    ShareTrader Legend Beagle's Avatar
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    Leverage really does magnify losses and is very very dangerous at times like this. Heard of one case very recently by PM where an investor, (who obviously I won't name and breech confidence) has lost a tremendous amount of capital, far more than the amount the shares he owns have fallen. Much too dangerous a strategy at the current time in my opinion.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  4. #14
    Advanced Member Entrep's Avatar
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    I don't really consider it leverage when it's a 25 year loan (would be paid off early of course) and there is zero chance of liquidation

  5. #15
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    Quote Originally Posted by Entrep View Post
    I don't really consider it leverage when it's a 25 year loan (would be paid off early of course) and there is zero chance of liquidation
    "A loan is not a loan because it has a 25 year term."

    It is amazing what logic can come out when people are very determined to gloss over the consequences of their leverage. There is never zero chance of liquidation. What happens if you or someone in your family got cancer and you needed funds to purchase one of the new drugs not yet funded by Pharmac? What would happen if the value of 'grannies jewellery', or your classic car' collapsed when you had to sell it in an emergency to cover the loan? What would happen if your bank collapsed and all the loans had to be bought out and refinanced by another party?

    If you must leverage your share portfolio (big emphasis on that word, not just one or two favourite shares) I would keep that leverage to no more than 10% of the portfolio value.

    SNOOPY
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  6. #16
    Advanced Member Entrep's Avatar
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    Appreciate your input Snoopy, it's certainly a loan and will have (minimal) repayment and cashflow impact.

    Leverage to me means a chance to get liquidated. Liquidation is possible with everything in life. The $10K I put into the market today could be $0 tomorrow and the next week I might need money urgently.

    I have considered my financial position with my accountant too and the real chance of liquidation is nil unless the world ends. If that happens this small loan will be the least of my worries.

  7. #17
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    Quote Originally Posted by Entrep View Post
    Appreciate your input Snoopy, it's certainly a loan and will have (minimal) repayment and cashflow impact.

    Leverage to me means a chance to get liquidated.
    I have a rather different understanding of the word 'leverage'. To me, there is no hint of recklessness in that word. 'Leverage' just means any investment where some part of that investment, however small, is paid for by borrowing.

    Quote Originally Posted by Entrep View Post
    Liquidation is possible with everything in life. The $10K I put into the market today could be $0 tomorrow and the next week I might need money urgently.

    I have considered my financial position with my accountant too and the real chance of liquidation is nil unless the world ends. If that happens this small loan will be the least of my worries.
    Fair enough Entrap. You have not further disclosed your overall financial position, when even despite you being an anonymous person on the internet, I would not advise nor expect you to do so. Yet it does sound as if you could stand your new borrowed $10k investment being totally wiped out, and yet still be OK. So it sounds like you have evaluated your risk of doing this in a careful and considered way. All the best with it.

    SNOOPY
    Last edited by Snoopy; 27-03-2020 at 12:59 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  8. #18
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    Quote Originally Posted by Entrep View Post
    If you have plenty of equity and are comfortable paying the debt, even without dividends, would you ever consider adding to your mortgage in times like these, to truly take advantage? The dividends would more or less cover the interest if you choose wisely and the interest would also be deductible against the dividends, I imagine.

    Anyone considering this or done it before and have some tips?
    Coming back to the original question
    In my view there is substantially less risk in doing this now than 3 months ago
    The market is being restricted by liquidity now and this gives you the advantage of liquidity when the market is a lot cheaper and there is more transparency as to outlooks.
    A far less risky preposition than property in my view
    Landlords are being squeezed dry with their equity positions being under review and no income from their tenants.
    Property investments will be a train wreck unless something changes for the better
    " A report by JPMorgan estimates balanced or 60:40 mutual funds, a $1.5 trillion universe in the US and $4.5 trillion universe globally, need to buy around $300 billion of equities to fully rebalance to 60% equity allocation. At the same time, the $7.5 trillion universe of US defined benefit plans, would need to buy $400 billion to fully rebalance and revert to pre-virus equity allocations. Finally, there are the “balanced” sovereign pension funds such as Norges Bank and GPIF, which according to JPM would need to buy around $150 billion of equities to fully revert to their target equity allocations of 70% and 50%, respectively."
    https://www.goodreturns.co.nz/articl...or+27+Mar+2020
    https://www.interest.co.nz/rural-new...-banks-watches
    https://www.interest.co.nz/opinion/1...ebtcredit-taps
    https://www.goodreturns.co.nz/articl...or+27+Mar+2020
    Last edited by kiora; 27-03-2020 at 08:49 PM.

  9. #19
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    Buffett never recommends leverage into stocks. Only purchase stocks with surplus funds. How do you know where the bottom is? It can get a lot worse. I do not think this will be over in 3 months but only when a vaccine is produced.

  10. #20
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    Quote Originally Posted by voltage View Post
    Buffett never recommends leverage into stocks. Only purchase stocks with surplus funds. How do you know where the bottom is? It can get a lot worse. I do not think this will be over in 3 months but only when a vaccine is produced.
    Or other peoples money.His first purchase was an insurance company.
    "investing the money taken in as premiums that have not yet been paid out for claims, a sum of money known as the float. For example, if an insurer is holding $1 billion in anticipation of future claims, the company is free to invest the money in the meantime and keep the profits."
    Just leverage in another form
    https://www.fool.com/investing/2019/...-a-52-yea.aspx

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