ANZ Protected Equity Investments

[Sam_H]

I've just been browing ANZ website and came across:

http://www.anz.com/Wealth/ProtectedEquity/default.asp

And in particular the pdf brocure

http://www.anz.com/documents/ed/apepbrochure.pdf

In a nutshell....

The reckon they will lend money to buy shares - and you don't have to provide any equity?

Not only that -if the market drops...they will cover the loses????

You simply pay the Interest payments monthy + transaction costs etc

Any comments?

Cheers

Sam

 

[XBenX]

CBA has a very similar product

from what I remember (which is as always very vague) the fees amd interest rate are killers

 

[Kevmeister]

I started reading about the CBA equivalent. I can't remember details, but I do remember the number of "fine points" involved means it is not a simple investment.

 

[bundy1964]

Hi

You would have to think there is a better way to buy shares with no money down?

bundy

 

[Terryw]

Watch out. This could hurt your serviceability. I have a friend's friend with $500,000 in shares in this ANZ fund. His CRA shows an inquiry for this!

And the fund hasn't moved up, but he has to pay out huge amounts in interest every year (around 15%?).

 

[bundy1964]

Given that dividend yeilds are around 6.5% fully franked and you are paying 15% interest and fees giving you a loss of 8.5%.

How long has it been since there was over 8.5% growth in shares on average?

That is a big chunk of money to pay out every month with paydays only being twice a year ( if they pay ) to minimise tax and create wealth?

bundy

 

[Sam_H]

Cheers guys
Yeah I only noticed later that the interest rates are 13-15%
Forgetaboutit...

Cheers


Sam

 

[paulzag]

ahh but most of those funds let you pick which company (from the ASX top 100-200) to invest in.

So if you want to be long and leveraged it is potentially acceptable if you compare it to other forms of borrowing.

Realise that they price the risk in.

Regards

Paulzag

 

[Bill.L]

Hi all

Just read a report from the tax office that they are looking at this type of investment and the fact that it is capital guaranteed may result in no deductions for the interest expense. Maybe Dale could shed more light on this.

bye

 

[DaleGG]

Hi

The tax office lost a court case not that long ago (Firth) which meant that the industry pulled out all stops to market these products further.

However, within the last month, or so, the government changed the laws which to limit the tax deductions to interest on the investment and not allow the interest on the "guaranteed" part of the investment.

In a nutshell, the concept was:

You buy good quality shares using no money of your own.
You keep the dividends
You get a tax deduction for the interest that you pay

In theory, the income and the tax refund should help to balance the costs of the loan.

Now, if the shares lose money, the fund will buy them back from you at your cost at the end of the loan so that you do not, indeed, cannot lose money on the deal.

If the shares increase in price, you keep the capital profits.

For those people interested in shares, have a good disposable income, and are tolerant to risks, then, they may be worth investigating further. To start with, you should ensure that the potential investment has a current product ruling from the ATO.

Dale

Originally posted by Bill.L
Hi all

Just read a report from the tax office that they are looking at this type of investment and the fact that it is capital guaranteed may result in no deductions for the interest expense. Maybe Dale could shed more light on this.

bye