I've recently been researching all I can get my hands on regarding margin loans. Searching these forums, Google, brokers info packs, etc.
No where does it say what is a sustainable LVR/gearing level to have for the mid-long term buy and hold investor.
I'm thinking anywhere over 50% loans are getting pretty risky and anything under 20% doesn't seem even worthwhile having it, so somewhere in between is a happy medium.
I've done worst case scenarios on excel and have figured out the below calculations. This would consider a 70% LVR available by brokers, causing a margin call. The below would be how far the stock(s) would have to fall to trigger an LVR over 70%
- If I borrowed 40% and had my own 60% a drop of 43% of the share price would trigger a margin call
- 30% borrowed, 70% my own would need a 58% drop to trigger
- 25% borrowed, 75% my own, would need 65% drop in share price
So looking at that, I'd say 30% borrowings would be ideal?