Geared Equity Investment Strategy

Geared Equities Investment Strategies allow investors to borrow their full investment amount and build a portfolio of ASX-listed shares and managed funds, or leverage off an existing portfolio and benefit from the security of 100 per cent loan principal protection throughout a term. 

A Strategy may be – Benefit From recovering Share market with Limited Downside

Throughout history the share market has always gone up over the longer term. The highest peak was in 2007 so how long until we get back there?

How Does it Work?

  1. The bank will lend you $100,000 (or a figure that you choose – min $50,000) to invest in a portfolio of ASX equities (or individual stock) which you can choose or chose from a model portfolio.
  2. Each month you will pay your interest making you eligible for a tax deduction this tax year. (note we can pay the interest up front bringing forward deduction this financial year)
  3. You will receive any dividends and franking credits from the shares.
  4. At the end of the term (can be from 1 to 5 years) if the value of the share (or any individual share if in a portfolio) is greater than the original cost you receive that amount of gain.
  5. If the value of a share falls you simply walk away from the loan associated with that share with no further obligations. It is a no recourse loan...ie) not your problem.

How Much Does it Cost

The after tax cost will depend on the following factors;

• Share selected (or portfolio) as this impacts the cost of protection.
• The level of the deductible rate (Benchmark rate)
• Level of franking credits.
• Level of dividends.
• Your marginal tax rate.

However, it is possible to build a portfolio that could have an after tax cost from say 2% to 4% per annum.

Please contact us at Shartru Wealth on [email protected] or 1300 478424 for more info.

The advice provided on this page is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstances.