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In this episode, Stuart discusses the feasibility and strategies of borrowing to invest in shares. He compares the practice of leveraging for share investments with the more commonly accepted approach of borrowing for property investments in Australia. Stuart highlights that gearing contributes significantly to property investment returns and the same principles can be applied to share investments.
The episode explores three borrowing options: margin loans, investment mortgages, and internally geared ETFs. Stuart addresses the higher volatility associated with shares and suggests mitigating strategies like regular investing and maintaining a conservative loan-to-value ratio.
He presents a case study demonstrating how an investor could accumulate substantial wealth by consistently investing borrowed funds alongside personal savings over an extended period of 24 years. Stuart estimates the investor would have tripled their investment by the end.
The episode concludes with Stuart's recommendations - for smaller portfolios under $500,000, he suggests internally geared ETFs, while for larger investments, he advises seeking professional guidance to ensure proper diversification and risk management through a mix of ETFs and low-cost managed funds.
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IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.
Ep 308: Warning: Does one spouse deal with all financial matters?
Case Study: Financial freedom through property and super: a 15-year success story
Ep 307: How do you know if you’ve been too risk adverse?
Case Study: What to do with employee shares
Ep 306: Should you buy an investment-grade apartment or a house in a secondary location?
Case Study: Beginning building wealth later in life
Ep 305: End of financial year tax planning tips for 2023/24
Case Study: Property investors: know when to diversify
EP 304: What is a strategic asset allocation? Why does it matter?
Case Study: Make life easier for your loved ones
Ep 303: Melbourne property will deliver the strongest growth over the next decade
Case Study: Restructuring a share portfolio across two ownership structures
Ep 302: To what extent should you factor in an inheritance?
Case Study: SMSF are often not necessary
Ep 301: Advice for first time property buyers and their parents
Case Study: Overcapitalising isn’t necessarily a big deal
Case Study: Spending more in the first 15 years of retirement
Ep 299: 20 years of poor property growth… is the property party over?
Case Study: Rebuilding wealth post-divorce
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