What is Margin Lending or Gearing all about?
Once your inefficient debt is under control, you can consider borrowing money to invest. This is the wealth creation strategy known as ‘gearing’. You have the potential to magnify your investment value as you have more money invested than you would otherwise, and you can reduce taxable income by claiming the interest on the loan. However, there are some risks to also take into consideration. For example, margin lending magnifies the potential for both gains and losses and if the market declines, so does your portfolio. If this happens, you will need to inject more cash or buy more shares to raise the portfolio’s value. It is strongly recommended that you seek professional advice before borrowing to invest, to ensure that you understand the tax implications, as well as the legal and financial ramifications of margin lending.
