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Re: Margin Lending




Unless I missed something in your question, I think the answer is quite simple....


Your portfolio will increase by exactly the same percentage, regardless of whether you have a margin loan or just a cash account.

The BIG difference is with a margin loan your entry point is higher. In other words X% increase (or decrease) in a small amount of money, is only a small amount of money but X% of a lot of money (like that borrowed in a margin loan) is a lot of money. Thats how gearing works - you start with more investment capital, you stand to make a larger profit or loss than with a small amount of cash of your own.

The actual % increase is exactly the same.


Obviously this equation sarts getting a little clouded when you start factoring in Interest on the Margin Loan, Dividend reinvestment etc, but you are still better off if you can borrow money to gear up your investment.

But like I said in my last post - be prepared to take a hit if you invest borrowed money in speccies. Not a good idea IMO.


Cheers


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