Our survey: Margin borrowers play safe
Our survey asked those with a margin loan which stocks they expected to dominate their leveraged portfolio in the coming year and what measures were they most likely to use to reduce the risk of a margin call.
Blue chip stocks were far and away the popular choice, followed by growth managed funds – not surprising given the volatility in the market as investors attempt to diversify their holdings. Next came shares most likely to pay franked dividends followed by balanced / conservative managed funds.
The most popular, and probably most obvious, way to avoid a margin call was to borrow less than the full LVR (41%). Next came portfolio diversification (25%) and dividend reinvestment (22%).
In the current volatile market investors should ensure they are aware of all the options open to them in managing the risk in their geared portfolio. ie. reinvesting dividends, borrowing less than at maximum LVR's, ensuring adequate cashflow to meet interest payments and margin calls.