Consider Protected Equity Loan Strategy

Despite the All Ordinaries Index reaching the 2800 barrier again this week, sentiments are certainly mixed in the market. Recent volatility was sparked by Dr Alan Greenspan’s comments on the record values of world sharemarkets and the Japanese economic crisis. In this climate of uncertainty, long-term investors with a ‘buy and hold approach’ may consider the concept of a protected loan arrangement an attractive option.

Protected Lending allows investors to make geared investment in shares without the risks associated with a fall in the value of shares. If at the end of the loan the shares have fallen in value you are only required to hand back those shares in settlement of the loan. On the other hand, if the value of the shares has risen, you pocket the difference between the loan amount and the portfolio value plus any dividends received during the loan. The pluses or minuses on investment gains will depend on the level of gearing. Gearing levels vary from 70% to 100% and interest rates will vary according to the level selected. Another bonus in a protected facility is in a market correction; investors are not subject to margin calls during the term of the loan. Protected equity loans also have the flexibility to accommodate selected individual shares or a balanced portfolio.

“For those considering such a move it may well be worth your while having a look at the Margin Lending section of www.bankchoice.com.au”.

Advertisement