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Colonial Margin Lending

What is a margin loan?

A margin loan allows you to borrow to invest using accepted shares, managed funds and cash investments as security.

With a margin loan you can use your existing investments or cash as your contribution. Margin lending provides you with the opportunity to invest more than you could using your own money, thereby increasing your potential for higher returns.

The amount you can borrow depends on the investments you provide as security. Each investment we accept as security has a percentage borrowing limit, which is the percentage of the investment’s value that you can borrow. The borrowing limits are generally between 40% and 75%.

A borrowing limit of 75% means you can borrow three quarters of the total value of the investment, provided that you use the total investment as security. So if you had $10,000 of your own money and wanted to invest in a managed fund which currently has a borrowing limit of 75%, you could borrow up to $30,000, provided you use the total $40,000 investment as security.

How does margin lending work?

Most margin loan facilities offer you two options:
With Lump Sum Gearing, you start with a lump-sum investment into managed funds and/or shares when the loan is established. Once your margin loan is set up you can choose to add to your investment or reduce your exposure. Regular or Instalment Gearing combines the power of a margin loan with all the benefits of a disciplined savings plan. Regular Gearing is where you combine your contribution with a borrowed amount using a margin loan to increase the size of your investment in one or more managed funds each month.

Example of a regular gearing strategy

Why use margin lending?

Borrowing to invest can allow you to:

What are the risks involved?

Borrowing to invest can enhance your investments and returns, however if your investments perform poorly it can also increase your losses.

Other risks associated with margin lending include:
There are a number of things you can do to reduce the risks associated with a margin loan. For example, borrowing less than the maximum allowed reduces the risk involved.

Before you apply for a margin loan, you should speak to your financial adviser who will be able to help you put an appropriate strategy in place. Investors should also obtain professional taxation advice that addresses their individual circumstances before taking out a margin loan.

To apply for a Colonial Margin Loan, simply download and complete the Application Form above. It’s that easy!

For more information about margin lending and Colonial Geared Investments please click here.

Colonial Geared Investments is part of the Commonwealth Bank of Australia ABN 48 123 123 124