What the margin means

The limit to the amount you can borrow on your margin loan is set by the value of your securities. As the market fluctuates, the value of your securities may go up or down. This in turn changes the upper limit to the amount you can borrow. Because of this, the margin between your balance and your loan limit can be a powerful tool as there is no set loan limit.

Chris's portfolio - compare two scenarios

	Chris's initial investment		Scenario 1: investment value rises 10%		Scenario 2: investment value falls 10%
	%	$	%	$	%	$
Market value of portfolio		40,000		44,000		36,000
Loan limit of portfolio (not including buffer)	75% limit	30,000	75% limit	33,000	75% limit	27,000
Loan balance	50% loan	20,000	45% loan	20,000	56% loan	20,000
Funds available		10,000		13,000		7,000

How a loan margin rises or falls

This fictional example shows how a loan margin changes with an increase or decrease of 10% in the value of the portfolio. Chris's initial investment is a diverse share portfolio with a total market value of $40,000. For the purpose of the example, the loan limit for each share investment is set to an average of 75%. Chris borrowed half the value of the investment, $20,000, so the loan is geared to 50%. He has $10,000 in available funds.

In Scenario 2 when the investment value of Chris's portfolio drops, he has $7,000 in available funds.

In Scenario 1 when the investment value of Chris's portfolio rises, he has $13,000 in available funds. In this scenario, Chris can borrow more using the multiplier effect.

Find out more about BT's margin lending.

Download a copy of 'Margin lending made easy' (PDF, 557 KB).
Read BT's margin lending case studies.
Find a financial adviser using BT's Adviser Referral Program.
Learn about BT's margin loans.