I would have to say CFD providers give you some of the highest leverages for investment.
To give you an example. For every 50cents you put you can borrow upto $100 to invest
If the investment increases by 0.5%. You double your money. Sounds pretty lucrative huh?
Cheers,
Oracle.
And if the investment decreases by 0.5%?
Any investment can be leveraged in various ways, property is simply just the most well known to most people.
I would suggest, that if you couldn't leverage direct property, it wouldn't be a very attractive investment though. Consider:
* High cost just to purchase a property outright.
* High stamp duties.
* High entry costs leads to limited diversification, thus high exposure to location based risk.
* Only investing in a single asset class.
* High holding costs (several different types of taxes, management fees, maintenace).
* High exit costs.
* Little opportunity to own via tax effective investment vehicles.
Without leveraging, I suspect property would not acheive anywhere near the capital growth that it does, although the rental yeilds would likely be substantially better.
Compare this to various share investments:
* Entry cost as little as a few $1000.
* No entry costs other than brokerage.
* Long term returns are comparible to property.
* Long term yields are also comparible to property (and due to franking credits for most people, are tax advantaged).
* No holding costs (unless being actively managed, but otherwise it's a buy and forget investment).
* No holding taxes.
* Easier to reduce risk through diversification.
* By choosing the appoprirate product, you can acutally invest in any asset class you like.
* Negligible exit costs.
* Same capital gains tax rules.
* More opportunity to invest via tax effective structures, in some cases making the investment completely tax free (both income tax and capital gains).
I'm certainly not anti property, but IMHO it's the leveraging that makes property a good investment, as well as the ability to be more hands on. The right asset class and how much it's leveraged comes down to the individuals resources, goals and risk profile. Direct property investment is fantiastic for some stratgies, but lousy for others.
Edit: Whilst writting this, I received a notification that effective immediately that ING is increaseing it's maximum LVR from 90% to 95% plus LMI for both owner occupied and investment purchases.
