Why use a margin loan?
You may consider a margin loan if you want to build an investment portfolio and be able to increase the amount you can invest. You may also want to take advantage of potential tax concessions or increase your potential to diversify.
Goal: to invest more
Rather than be limited by access to your own capital, when you take out a margin loan, you borrow from the lender to grow your wealth. You are therefore able to invest more.
Read more about the multiplier effect.
Goal: to multiply returns
Borrowing money increases the size of your investment, so you can potentially gain even more on positive returns. Of course, a geared portfolio will have a greater potential loss should the investment fall in value.
Goal: tax concessions
You may be able to claim tax concessions to margin lending, for example:
- claim tax deductions for the interest you pay on the loan
- reduce exposure to capital gains tax
- use a margin loan as part of your business tax planning.
Note: Tax laws are complex and may change over time, possibly with retrospective application.
You should consult a tax specialist or your financial adviser regarding the tax consequences of investing in a margin loan.
Check out the tax efficiencies that may apply to your geared investments.
Goal: to diversify
With more money to invest, you can spread more money across more investments. This is a method of reducing investment risk without sacrificing long-term performance.
The information on this page forms part of the BT Margin Lending Margin Loan Product Disclosure Statement issued 15 November 2010.
