Investor appetite for margin loans took a considerable hit following the GFC- and it hasn't fully recovered. In fact, data from the Reserve Bank shows that the number of margin loan accounts and the total value of lending are both roughly 62% lower now than at their peak in December 2007.
That's not to say there aren't plenty of investors still utilising margin loans, though, as the latest figures show that there were 91,000 accounts and $15.8 billion in total loans in the September quarter of 2022.
For Glen Hare, financial adviser and co-founder of Fox & Hare Wealth, using a margin loan as part of an investment strategy is certainly worth investigating.
"I don't think there's any reason why you shouldn't at least consider margin lending, but there are certainly things to acknowledge and the first is obviously the risk associated with it.
"There can be upside, but there's definitely risk associated with it as well, so it really does depend on the individual's relationship with risk, their understanding of the risk they're taking and what the purpose of the margin loan is."
So, what are those potential risks, what are the benefits and what else should an investor consider before taking out a margin loan?
At its core, a margin loan is simply a loan that can be used to purchase shares, managed funds and exchange traded funds (ETFs) using existing shares or cash as security. Investors can potentially increase their investment exposure and, all things going well, their overall wealth, beyond what they would generally be able to do if they just used their own money.
Extra flexibility
Lily Elliott, head of the margin lending specialist Leveraged, says it can help investors execute a number of strategies.
Denne historien er fra April 2023-utgaven av Money Magazine Australia.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra April 2023-utgaven av Money Magazine Australia.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
An outrageous, beautiful monopoly
Telstra's mobile business is a cash machine with few competitors, giving it the highest returns in the world.
Drop the anchor to judge value
Buying and selling decisions should be based on where a stock price is going, not where it has been.
Powering the AI boom
Beyond the software and chipmakers, where will the energy come from?
Get into life
Tucked inside super are products that can protect you from life's inevitable uncertainties.
Paths to home ownership
Taking the road less travelled can sometimes deliver unexpected benefits.
Sold! Quick ways to add value
Small, strategic changes can have a big impact on the look and feel of your home. And get you a better price on auction day.
Money lessons the kids need to know
Your children can learn a lot from your past money mishaps. Here are eight financial conversations I have had with mine.
Property-investing rules: are they likely to change?
The pressure for the government to curb the tax benefits of tax concessions, such as negative gearing and the capital gains tax discount, is unrelenting. Most recently, independent senators David Pocock and Jacqui Lambie proposed five options for paring back investment property tax concessions, with savings to the Federal budget of up to $60 billion over the next decade.
What's love got to do with it?
A rollercoaster of emotions could be driving poor crypto behaviour.
Are we ready to be cash-free?
Saying goodbye to our piggy banks too soon could leave small businesses in the dark when problems arise.
