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Gearing Strategies

Borrowing to invest, or gearing, can be a powerful means to build wealth. It allows you to increase your ability to

build wealth by enabling a higher level of investment than would otherwise be possible. You can either positively gear

or negatively gear.

 

The Benefits of Gearing

  • Enables you to understand a higher level of investment than may otherwise be possible.
  • In favourable market conditions, your earnings can be mutlipled.
  • Generally, if the cost of borrowing exceeds the income generated from the investment, this excess is an allowable
    deduction.
  • If you borrow to invest in shares you may obtain imputation credits which can be used to reduce the amount of
    tax you pay.

 

The Risks of Gearing

  • An asset may not provide the expected return
  • The market conditions under which you are borrowing may change. If you over-borrow, rising interest rates could restrict your ability to meet the loan payments.
  • If you rely on the income from the investment/s, there may be periods where it produces little or no income, or even losses.
  • Gearing can multiply your loss.
  • If you take out a margin loan, and the market value of your investment falls enough to cause the balance of the loan to exceed the maximum lending value of your portfolio, you will be subject to a margin call.

For more information on gearing strategies, Contact us to arrange a complimentary initial interview with a Best Wealth Creation Adviser.

Why would you choose a financial adviser from Best Wealth Creation in Townsville?

Our personalised advice includes input from a team of experts in financial planning, tax, investment, superannuation, estate planning and philanthropy based on your requirements. This comprehensive approach helps ensure we can identify the most effective way to enhance your financial circumstances. Our advice can also be supported through an ongoing relationship with Best Wealth Creation which allows you to choose the level of our ongoing participation in your financial affairs.