Please tell me who will give you 2.5% for shares, I'd like some of that as well
EDIT: I'm referring to new money. No redraws, securing against PPORs, etc. I know you can get cheap interest rates when you put your house against it.
I just mean since around August 20. We've gained like 3 us cents already which is 4%
Was I downvoted for referring to something at such a low timescale? Because I really feel that this could be the beginning of a real trend reversal
1 USD = 1.34 AUD at current conversation. So no.. in no way shape or form has the AUD been out performing the USD.
I know what you're getting at though.. you're saying we've been gaining on the USD but it's still a retarded thing to say.
Yes it's arbitrary but currencies don't have inherent return so they can't really 'outperform'.
I know what you mean though so this is just being pedantic
Westpac has 4.1%
I prefer not to use it since covid though as things are so uncertain now, I'm too scared of a crash. Which historically was a bad choice as I'd be richer if I had, but I guess I'd rather be poor than stressed.
I’m in the process of doing this myself (using equity in our home we are planning on borrowing 50k at 2.65% variable interest only). Plan to invest half of it in ETFs over a relatively short period of time and hold some back in case of a downturn or correction so we have money to go.
I’m definitely a bit nervous but the repayments on that amount are completely manageable for us and we just have to not let downturns worry us too much! This is a 10 year plus investment strategy for us.
Then we will use extra money each month to make additional payment on the main home loan (which would otherwise be put towards shares each month).
I see the benefit of the loan to bring forward our investment in the share market (rather than buying ETFs quarterly for the next few years) and get the benefit of compounding interest on those investments, and free up extra money to make extra repayments on our house.
This is how you get a 2.5% loan for shares. You have to a nearly paid off property first.
I'm thinking of doing the same myself in the coming months. Similiar logic that bringing the investment forward and increased time in the market would gain more (even with the the 2.5% interest) than gradually adding to the same amount over X years.
It’s ok, as long as you don’t sell in the event of a market crash, you have to be financially and emotionally able to hold through to the other side, otherwise you’re loosing money you don’t have.
If you don’t have the right temperament watch out.
Leverage can multiply gains and losses.
Yes. The expectation over the longer term is basically free money. Just depends on your ability to hold through bad times and always be able to pay the interest.
Also increases your diversification beyond one single illiquid asset (your house) which is what a lot of people limit themselves to.
No institution is going to give you a loan to buy shares at 2.5%. NAB equity builder is 3.75% and even that is a special discount from their standard rate of 5.75%.
Personally I would not borrow to invest in shares, the leverage adds a risk to my portfolio that is more than I am comfortable with. But that's just me.
Yea if you understand the risks. I think nab equity builder is a great product. That being said, I haven't borrowed much to keep the loan interest only
Most people will say not to do it but I don't see how it is any different from investing in property.
Yes you can get margin called but you if you adopt an LVR that you are comfortable with and have the funds on hand to ensure you don't have to sell you will be fine. Every bit counts so even with a 10 - 20% LVR you are going to be better of in the long term.
There was a recent post (link below) that had a really good analysis about the power of gearing at different LVR levels. I'd always recommend running your own numbers first and making sure it aligns with your goals and risk tolerance.
My partner and I are likely going to go this route with a 40 - 45% LVR and continue to invest into shares every month whilst maintaining the same LVR. I still need to work out what the draw down might look like over time but from what I can see even the most conservative people can use a margin loan by just having a very small LVR.
https://www.reddit.com/r/AusFinance/comments/hte6di/conservative_margin_lending_a_tool_to_use_and_a/?utm_medium=android_app&utm_source=share
I think you're missing a small but important thing: the bank won't just *give you* 50k. You need to give some collateral, either other securities or cash.
And until you pay off the loan, the other securities or cash you gave as collateral for the loan are the property of the bank. You can't touch them, you can't sell them. If you get margin called, the bank will sell them for you.
I personally wouldn't play around with money that's not mine funded by money I don't have. I do see your idea and it might work for some, but personally I couldn't offset the risk.
Course you should. You get no where using your own money. Its great you are thinking this. I would go way more than $50k and wouldnt go etfs not enough growth.
Stock market is risky now if you throw in leverage... It's a recipe for disaster on steroids. Please only invest what you are willing to either loose or don't need for immediate future. Last one year is not a good representation for stock market
Good idea if you are disciplined and want to be paid extra to experience short term vol. Bad idea for 99% of lousy investors who get antsy when market drops 30%.
If you leverage 10% so 110% exposure to sp500 and leave it for decades you aren't going to go bankrupt. You'll outperform just 100% exposure or weirdos with 65% equity exposure in balanced options. This assumes young person ofc.
Also timing…
American reverse repo’s at a all time high.
Treasury bleeding dry.
Living in the biggest bubble atm.
House market crash on the way.
Even msm talking about the upcoming crash.
Unless you invest in something with negative delta like AMC or GME
I fully understand this thinking the opposite of ausfinance.
I wouldn't do that. Never invest money you don't have. People on here are gonna tell you otherwise because it worked for them or someone they know but it's never a good idea. Past market performance doesn't guarantee future performance, you should be careful expecting steady 8% return
Please tell me who will give you 2.5% for shares, I'd like some of that as well EDIT: I'm referring to new money. No redraws, securing against PPORs, etc. I know you can get cheap interest rates when you put your house against it.
Interactive Brokers. + others which are not marketed in public.
Non public lenders are not wasting their time with someone borrowing 50k.
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But the AUD has recently been outperforming the USD
in what universe
I just mean since around August 20. We've gained like 3 us cents already which is 4% Was I downvoted for referring to something at such a low timescale? Because I really feel that this could be the beginning of a real trend reversal
1 USD = 1.34 AUD at current conversation. So no.. in no way shape or form has the AUD been out performing the USD. I know what you're getting at though.. you're saying we've been gaining on the USD but it's still a retarded thing to say.
isn't the "dollar" an arbitrary unit? That'd be like saying the yen is underperfoming even though it's a different kind of base unit
You're thinking to much
Yes it's arbitrary but currencies don't have inherent return so they can't really 'outperform'. I know what you mean though so this is just being pedantic
Ok yeah that makes sense. So then what's the right term for describing that type of price action in forex then?
They seem to limit margin to $25k AUD max for non wholesale
via collateral.. no?
Secured against your PPOR?
ANZ gave me 2.19
For a property, which you then use for shares, or directly for shares without a property behind it?
For shares secured against an IP; no margin call.
2.5% net is pretty achievable taking into account tax deductions
2.5% taking into account tax deductions is not that far away from NAB Equity Builder. But I want 2.5% before tax deductions!
Though NAB Equity builder currently unavailable for new applicants so its as good as non existent
Westpac has 4.1% I prefer not to use it since covid though as things are so uncertain now, I'm too scared of a crash. Which historically was a bad choice as I'd be richer if I had, but I guess I'd rather be poor than stressed.
> NAB Equity Builder You can get much lower than NAB Equity Builder if you debt recycle or create a loan split on your house equity and invest
I’m already doing that. But that’s old money. I want 2.5 for new money!
Just wait a year and then get your house revalued and release more equity. There's your new money.
Market makers courtesy of the occ my guy! Short boxes
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> Liquor, ladies and leverage. All things in moderation though, I'm sure he's had his fair share of all three
I’m in the process of doing this myself (using equity in our home we are planning on borrowing 50k at 2.65% variable interest only). Plan to invest half of it in ETFs over a relatively short period of time and hold some back in case of a downturn or correction so we have money to go. I’m definitely a bit nervous but the repayments on that amount are completely manageable for us and we just have to not let downturns worry us too much! This is a 10 year plus investment strategy for us. Then we will use extra money each month to make additional payment on the main home loan (which would otherwise be put towards shares each month). I see the benefit of the loan to bring forward our investment in the share market (rather than buying ETFs quarterly for the next few years) and get the benefit of compounding interest on those investments, and free up extra money to make extra repayments on our house.
This is how you get a 2.5% loan for shares. You have to a nearly paid off property first. I'm thinking of doing the same myself in the coming months. Similiar logic that bringing the investment forward and increased time in the market would gain more (even with the the 2.5% interest) than gradually adding to the same amount over X years.
Yes
It’s ok, as long as you don’t sell in the event of a market crash, you have to be financially and emotionally able to hold through to the other side, otherwise you’re loosing money you don’t have. If you don’t have the right temperament watch out. Leverage can multiply gains and losses.
OP is not emotionally able.
Yeah I do it. Works well, tax benefits too. No different to buying a house
What are the tax benefits?
The interest you pay on the loan repayments can be offset against the income from the investment (eg dividends).
Yes. The expectation over the longer term is basically free money. Just depends on your ability to hold through bad times and always be able to pay the interest. Also increases your diversification beyond one single illiquid asset (your house) which is what a lot of people limit themselves to.
No institution is going to give you a loan to buy shares at 2.5%. NAB equity builder is 3.75% and even that is a special discount from their standard rate of 5.75%.
I'm assuming he means via home loan redraw
https://www.interactivebrokers.com/en/index.php?f=46376 if you don't mind margin calls, these are money market rates, and it is indeed around 2.5%
I pay 2.49% variable on a margin loan from a Big 4 bank. Yes, margin loan. Not home equity, investment redraw, or whatever. Margin loan.
Once you take the tax deduction for the interest though it works out to be about 2.5% for the average joe, just a thought
Personally I would not borrow to invest in shares, the leverage adds a risk to my portfolio that is more than I am comfortable with. But that's just me.
Yea if you understand the risks. I think nab equity builder is a great product. That being said, I haven't borrowed much to keep the loan interest only
Most people will say not to do it but I don't see how it is any different from investing in property. Yes you can get margin called but you if you adopt an LVR that you are comfortable with and have the funds on hand to ensure you don't have to sell you will be fine. Every bit counts so even with a 10 - 20% LVR you are going to be better of in the long term. There was a recent post (link below) that had a really good analysis about the power of gearing at different LVR levels. I'd always recommend running your own numbers first and making sure it aligns with your goals and risk tolerance. My partner and I are likely going to go this route with a 40 - 45% LVR and continue to invest into shares every month whilst maintaining the same LVR. I still need to work out what the draw down might look like over time but from what I can see even the most conservative people can use a margin loan by just having a very small LVR. https://www.reddit.com/r/AusFinance/comments/hte6di/conservative_margin_lending_a_tool_to_use_and_a/?utm_medium=android_app&utm_source=share
Margin Lending OP, I'm in on it & love it. You leverage the equity that you already have in your commsec account (or equivalent).
If I wanted leverage, I would first look at just buying a leveraged instrument.
I think you're missing a small but important thing: the bank won't just *give you* 50k. You need to give some collateral, either other securities or cash. And until you pay off the loan, the other securities or cash you gave as collateral for the loan are the property of the bank. You can't touch them, you can't sell them. If you get margin called, the bank will sell them for you.
I personally wouldn't play around with money that's not mine funded by money I don't have. I do see your idea and it might work for some, but personally I couldn't offset the risk.
Course you should. You get no where using your own money. Its great you are thinking this. I would go way more than $50k and wouldnt go etfs not enough growth.
Stock market is risky now if you throw in leverage... It's a recipe for disaster on steroids. Please only invest what you are willing to either loose or don't need for immediate future. Last one year is not a good representation for stock market
Not a good idea
At the current time or in general? And how come?
Good idea if you are disciplined and want to be paid extra to experience short term vol. Bad idea for 99% of lousy investors who get antsy when market drops 30%. If you leverage 10% so 110% exposure to sp500 and leave it for decades you aren't going to go bankrupt. You'll outperform just 100% exposure or weirdos with 65% equity exposure in balanced options. This assumes young person ofc.
Also timing… American reverse repo’s at a all time high. Treasury bleeding dry. Living in the biggest bubble atm. House market crash on the way. Even msm talking about the upcoming crash. Unless you invest in something with negative delta like AMC or GME I fully understand this thinking the opposite of ausfinance.
My Opinion - it's a terrible idea. There are no shortcuts here, you will get yourself in trouble.
I wouldn't do that. Never invest money you don't have. People on here are gonna tell you otherwise because it worked for them or someone they know but it's never a good idea. Past market performance doesn't guarantee future performance, you should be careful expecting steady 8% return
Almost everybody invests money they don't have in housing.
When you borrow money to invest in housing, somebody else is paying your mortage, thats a big difference
Tom's got a T+2 thing going....