Summary
Margin loans are a powerful tool, allowing you to leverage into shares and managed fund investments, without necessarily needing to put up any other collateral (such as the family home) as security for the loan. The shares and funds themselves form the security for the loan, but the catch is that the lender insists that you maintain a healthy buffer to ensure that they (and you) don’t get caught with zero or negative equity in a falling market.
Margin calls can be a worrying issue for investors, especially in a market that’s already dropping – being forced to sell some of your shares or units at this time may not be part of your plan. With some care and planning – and some good professional advice, you can be prepared for the situation where a margin call arises, or perhaps even avoid them all together.
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