This is my first post and I have done a quick search but didn't really find what I was after.
I have a couple of questions on margin lending.
In regards to the GR (gearing ratio ) that you see advertised by banks, does this mean how much they are will to loan against that particular stock.
eg. WPL gr 75%, does that mean I can put in $15 and the lender will put in an additional $75 giving me a $100 investment. ??
Also if I did gear to the full amount eg 75%, does that mean as soon as the share price drops below what I initial paid for them I get a margin call???
I have owned shares for a no of years but have never used gearing mainly because I didn't understand it, and have only woken up to the fact that its the leavaging that creates the wealth, and thats why people have done so well out of property because the banks are willing to lend heavily on this investment.
I do understand the risks with leavaging as well, as it not only magnifies your increases, it will magnifiy your losses as well if the market turns against you.
Thanks is advance.