What are the risks? - Investments & advice

What are the risks?

Margin loans, like all loans, carry risk.

When taking out a loan to invest in property, there is always the risk the property value can go down. That same risk applies to a margin loan. That is, the value of your portfolio can fall instead of rise.

If the value of the shares or managed funds you have as security for your margin loan drops below a certain point, relative to how much you have borrowed, a margin call will be triggered.

Suggested ways to minimise risk:

Research before you buy
When purchasing shares, you are buying a piece of a company. Research and understand what you are buying before you make the purchase. A professional adviser can guide you on selecting investments to suit your needs.

Diversify your investment
By investing in a broad range of shares or managed funds there may be limited impact on your overall portfolio if one performs poorly.

Take a long-term approach
The sharemarket will typically experience peaks and troughs. However, the longer you stay invested the less likely you will be affected by short-term volatility.

'Average in' to the market
You can also gradually increase your investments, over one to two years, to reduce the chances of buying in when the market is at its peak. This is sometimes referred to as ‘dollar cost averaging’.

Create your own additional buffer
Just because you can borrow up to, say 75%, of your portfolio doesn’t necessarily mean you should borrow the full amount. Investing below your maximum could provide you with a cushion, should there be fall in the sharemarket and the value of your portfolio.

Reinvest
Dividends and fund distributions from your share investments can be used to offset your loan balance, or purchase additional units or shares. In time, this could help reduce your gearing level.

Monitor your account
It pays to regularly check the changing values of the investments within your portfolio. You can quickly and conveniently do this by logging onto ‘My Portfolio’, the online reporting tool for your ANZ Share Investment Loan. That way you can be prepared to take action when necessary.

Important information

Leveraging a share portfolio is fast becoming a popular wealth creation strategy. However, you should be aware that whilst leveraging into investments increases the potential return, it is important to recognise that it can also multiply the effects of falls in share market values and you may be asked to sell down your portfolio or put in extra funds into your account following a margin call. We therefore strongly advise you talk to a financial planner, tax adviser and/or stockbroker and ensure you understand the risks, the specific tax implications, as well as the legal and financial ramifications of a share investment lending facility.

The information provided is general in nature only and is not tax advice, and has not been prepared taking into consideration your particular needs, circumstances or objectives. ANZ recommends that you speak with a financial adviser or broker to determine whether a share investment loan from ANZ is a suitable wealth creation tool for you.

ANZ recommends you read the Terms and Conditions before acquiring the product. Fees and charges apply.

All ANZ Investment Lending applications are subject to ANZ’s credit approval criteria.

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