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Hi,
I have been doing some reading on margin lending and I believe negative gearing may suit my current financial position and investment goals.

I’m a young professional (23 years old) with a relatively stable income. I have been researching the share market for approximately a year, and have made some small share purchases over the last 3 months.

I’m only interested in mid-long term investments (5< years) rather than share trading. My current financial standing allows me to take on increased risk.

If I do decide to take out a margin loan it will most likely be with Commsec.

On the Commsec site they always use an example where someone buys a single stock that is listed on their approved shares list with a certain lending ratio which gives them the appropriate lending value for which they can borrow or choose to decrease for a larger buffer from margin calls.

My first question is: If I wanted to take out a margin loan and diversify between a number of companies, how will the margin loan be initiated? Are you required to have already invested in an approved share (on commsec’s site with a particular lending ratio) to use as security for the loan? Than you can use the loan from that approved share to invest in whatever you like? Or is it possible to start off with cash?

E.g.
If I wanted to open a margin loan using BHP shares as security, and BHP contains a $30 share value and a lending ratio of 70%. If I wanted to borrow $50000.00 I would have to obtain 2381 BHP shares worth $71428.57, and I would be liable for 30% of that which would be $21428.57 (714 BHP shares).

But this forces me to purchase a lot of shares of one company, so do you just do this in smaller amounts for a number of companies if you wanted to diversify?

My second question is: Are LVR (loan value ratio) and Lending value the same thing? How does it get calculated in a diversified portfolio? Does it just get calculated for every share separately that you have applied for a margin loan or is it somehow a total market value of your share portfolio?

E.g.
If I include the above example with BHP and I chose to borrow $50000 dollars and invest in other companies, how does the lending value get calculated, because the market value of the other shares would vary? So I’m basically confused as to how you manage the margin loan LVR in terms of avoiding margin call in a diversified portfolio.

If anyone can clear some of this up that would be greatly appreciated.

Cheers,

Quinn

<blockquote data-quote="quinn123" data-source="post: 402073" data-attributes="member: 22169">Hi,I have been doing some reading on margin lending and I believe negative gearing may suit my current financial position and investment goals.&nbsp; I’m a young professional (23 years old) with a relatively stable income.&nbsp; I have been researching the share market for approximately a year, and have made some small share purchases over the last 3 months.&nbsp; I’m only interested in mid-long term investments (5&lt; years) rather than share trading.&nbsp; My current financial standing allows me to take on increased risk.&nbsp; &nbsp; &nbsp; If I do decide to take out a margin loan it will most likely be with Commsec.On the Commsec site they always use an example where someone buys a single stock that is listed on their approved shares list with a certain lending ratio which gives them the appropriate lending value for which they can borrow or choose to decrease for a larger buffer from margin calls.My first question is:&nbsp;&nbsp; If I wanted to take out a margin loan and diversify between a number of companies, how will the margin loan be initiated?&nbsp; Are you required to have already invested in an approved share (on commsec’s site with a particular lending ratio) to use as security for the loan?&nbsp; Than you can use the loan from that approved share to invest in whatever you like?&nbsp; Or is it possible to start off with cash?&nbsp; E.g.If I wanted to open a margin loan using BHP shares as security, and BHP contains a $30 share value and a lending ratio of 70%.&nbsp;&nbsp; If I wanted to borrow $50000.00 I would have to obtain 2381 BHP shares worth $71428.57, and I would be liable for 30% of that which would be $21428.57 (714 BHP shares).&nbsp; But this forces me to purchase a lot of shares of one company, so do you just do this in smaller amounts for a number of companies if you wanted to diversify?&nbsp; My second question is:&nbsp; Are LVR (loan value ratio) and Lending value the same thing?&nbsp; How does it get calculated in a diversified portfolio?&nbsp;&nbsp; Does it just get calculated for every share separately that you have applied for a margin loan or is it somehow a total market value of your share portfolio?&nbsp; E.g.If I include the above example with BHP and I chose to borrow $50000 dollars and invest in other companies, how does the lending value get calculated, because the market value of the other shares would vary?&nbsp; So I’m basically confused as to how you manage the margin loan LVR in terms of avoiding margin call in a diversified portfolio.&nbsp; If anyone can clear some of this up that would be greatly appreciated.&nbsp; Cheers,Quinn</blockquote>

[QUOTE="quinn123, post: 402073, member: 22169"] Hi, I have been doing some reading on margin lending and I believe negative gearing may suit my current financial position and investment goals. I’m a young professional (23 years old) with a relatively stable income. I have been researching the share market for approximately a year, and have made some small share purchases over the last 3 months. I’m only interested in mid-long term investments (5< years) rather than share trading. My current financial standing allows me to take on increased risk. If I do decide to take out a margin loan it will most likely be with [B]Commsec[/B]. On the Commsec site they always use an example where someone buys a single stock that is listed on their approved shares list with a certain lending ratio which gives them the appropriate lending value for which they can borrow or choose to decrease for a larger buffer from margin calls. [B]My first question is:[/B] If I wanted to take out a margin loan and diversify between a number of companies, how will the margin loan be initiated? Are you required to have already invested in an approved share (on commsec’s site with a particular lending ratio) to use as security for the loan? Than you can use the loan from that approved share to invest in whatever you like? Or is it possible to start off with cash? E.g. If I wanted to open a margin loan using BHP shares as security, and BHP contains a $30 share value and a lending ratio of 70%. If I wanted to borrow $50000.00 I would have to obtain 2381 BHP shares worth $71428.57, and I would be liable for 30% of that which would be $21428.57 (714 BHP shares). But this forces me to purchase a lot of shares of one company, so do you just do this in smaller amounts for a number of companies if you wanted to diversify? [B]My second question is:[/B] Are LVR (loan value ratio) and Lending value the same thing? How does it get calculated in a diversified portfolio? Does it just get calculated for every share separately that you have applied for a margin loan or is it somehow a total market value of your share portfolio? E.g. If I include the above example with BHP and I chose to borrow $50000 dollars and invest in other companies, how does the lending value get calculated, because the market value of the other shares would vary? So I’m basically confused as to how you manage the margin loan LVR in terms of avoiding margin call in a diversified portfolio. If anyone can clear some of this up that would be greatly appreciated. Cheers, Quinn [/QUOTE]

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