Steveadl
I may well have contributed to any discussion Michael had on margin lending because I have had a margin a/c for many years and I am a big believer in them.
Go to
www.leveraged.com.au or
www.comsec.com.au and you will will be able to read how they work. I know Leveraged Equities (LE) give you a 15% buffer before they make a margin call. You can't buy stock with this buffer but it does give give a little time to reverse a temporary setback or make an orderly retreat. I am more conservative than most here but that may well be because I'm an old, clapped out digger, so starting again is not an option, but margin loans don't scare me. With experience you will be able to virtually take the risk of a call out of the equation. At worst they are a bit of enforced discipline.
One way for anyone with considerable equity in a property (being a commercial loan this facility may only be available on an IP) can take out a mortgage backed margin loan with far greater freedom. You can read about that on the LE site.
LE is not a broker so buying and selling in the a/c must be through an expensive broker. Guess that doesn't matter if you are in buy/hold funds though. Comsec will give you cheaper brokerage. A third option is Sonray (
www.sonray.com.au ) or Tricom (
www.tricom.com.au). They offer both shares and CFDs (dangerous things) on the ASX and NYSE. Brokerage is pretty cheap and you get a margin on shares automatically and your available funds reflects change in price of both shares and CFDs in the account.
All of these facilities allow you to capitalise interest, ie you only need to pay the monthly interest if you run out of margin. Drawing down funds is simply a matter of an on-line instruction.
It's not rocket science but you do need to think about what you are doing.
ps. I'm on record as not recommending funds generally. I have said that learning about the markets by investing in funds is like learning to drive in the passenger seat of a cab. But many knowledgeable people use them for stability and for difficult sectors such as overseas markets. For the ASX, BHP is a proxy for a diversified resource fund without management fees.
Edit:
being a commercial loan This could be important. It means you are outside the consumer protection laws. But if, like me, you believe consumer protection does nothing for the consumer except wrap things in red tape, it won't be of concern.
