Margin Loan on Navra units

Giddo submitted a new resource:

Margin Loan on Navra units - Margin Loan on Navra units

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Hi Giddo,

This is just a pretty basic spreadsheet so you can quickly see the outcome of different scenarios. Have a play around with the rate of return from the fund, and also the interest rate of the margin loan, to see if it is still viable in more bearish situations. Basically, the level of gearing will magnify any gains or losses.

Best wishes, Chris

 

Very good Chris. Thanks a million, just what I wanted.
Giddo

 

Or you could try this one..

 

Thats much prettier than mine, maybe I should have coloured some cells!

 

Ok stupid question but I'll ask. From the spreadsheet (and other reading) I've always been under the impression that the LVR was calculated using the total portfolio value (ie if I have 100 ANZ shares, and purchase another 100 ANZ shares with my loan, I'm at 50%, as the loan is 50% of the folio).

I now seen online that if I have $50,000 of existing shares and my LVR is 70% then I can only purchase an extra $34,000 shares to add to my folio, which would be the MAX, leaving no safety margin, so if I want 50% I can only buy $25,000 of shares with the margin loan.

Is there a difference from starting from scratch vs using an existing portfolio, or am I just missing something simple in this?

Thanks for that help.

 

I think you missed adding in the value of the shares you are buying.

Say you had 50K of existing shares and the margin amount was 70% you could take 35k in cash and max out your LVR or by buying shares at 70%, you could buy 50k worth and have a LVR of 50% and a buffer between 25% and 30% depending on which loan you use.

 

Ahhh, cool, so it's one of those things that would turn up, after I've done it. Thanks.