Borrowing to invest

 

Borrow to invest from just 8.70%^

 

Offset account

Any proceeds from short shares selling generates cash which is deposited into your Funds Balance. This will act to reduce any interest you may be paying if you have borrowed to invest in shares.

One of the key efficiencies of trading shares through Macquarie Prime is the fact that your interest is calculated on your Funds Balance of your Prime Account, taking into consideration both long positions purchased using the loan facility and short positions. This will significantly reduce your interest cost when you have both long and short positions in your share portfolio.

Example scenario

If you have 

  • a $100,00 long positions in share A
  • Blocked Equity of $10,000  
  • Available Funds of $10,000 
  • your Funds Balance will equal -$80,000. 

Hence you will pay interest on this negative Funds Balance.

Next you decide you want to enter into 

  • a $100,000 short position in share B
  • which requires you to hold $10,000 Margin as Blocked Funds
  • The sale proceeds from opening the short position are deposited and blocked in your Funds Balance
  • Hence your Funds Balance increases by $90,000 (with $10,000 being reallocated from Available Funds to Blocked Funds) to $10,000.

Now you will earn interest on this positive Funds Balance.

Please note that the funding offset operates only in relation to your share positions and not your positions in CFDs and any funds held in Blocked Funds are ignored for the purposes of offsetting.

Transfer existing shares and loans

If you want to take advantage of new investment opportunities, Macquarie Prime has the flexibility you need.

  • You can easily transfer existing share holdings into Macquarie Prime without selling your existing shares
  • You should not crystallise a Capital Gains Tax event when you transfer your existing shares into your Macquarie Prime Facility
  • If you have a current investment loan against your share portfolio you can apply to refinance this loan with your Macquarie Prime Facility

Trading strategy

Borrow to invest

Borrowing to invest gives you the potential to increase the size of your returns by increasing the size of your investments

Borrowing to invest or 'gearing' has long been a popular wealth creation strategy in the Australian property market - for example, putting a deposit down on a house and borrowing the balance. Gearing into financial markets has now become a popular practice for many investors where you can gain exposure to a share or listed security with a relatively small outlay.

If you decide to take advantage of Macquarie Prime's optional loan facility, you can borrow to invest in more than 750 ASX - listed securities. A highlight is that the gearing level is variable so when you use the loan facility to buy shares, you can determine how much of your own funds you want to commit upfront. This means you are effectively choosing the gearing level that suits your personal preference - from zero to 95%±.

Choose your level of gearing

Macquarie Prime is a flexible facility that lets you vary your gearing level anywhere between 0 and 95%±. As a minimum you meet the margin requirements for any shares purchased using the loan facility, however by depositing additional funds into your Prime Account you can effectively reduce your gearing level.

The gearing derived from borrowing to invest in shares is determined by the ratio of your Funds Balance (which included margin and available cash) to the value of your long share positions.

Example scenario

For example, the following table illustrates levels of gearing on a $100,000 share investment with different Funds Balances.

The greater the level of gearing, the greater the potential returns but this also increases your risk because gearing will magnify any losses. Variable gearing enables you to choose your own gearing risk level.

Share Value Required Margin Available Funds Funds Balance Effective Gearing Ratio
$100,000 $10,000 $90,000 - 0%
$100,000 $10,000 $40,000 -$50,000 50%
$100,000 $10,000 $15,000 -$75,000 75%
$100,000 $10,000 $5,000 -$85,000 85%
$100,000 $10,000 $0 -$90,000 90%


More information the risks of gearing

 

Margin Requirements

When borrowing to invest in shares or opening a new CFD position, you do not need to make a payment for the face value of the underlying shares. Macquarie only requires you to have a fraction of this amount in available funds to meet your margin requirements. This margin represents security held by Macquarie for our exposure to you meeting your obligations, and is dependent on your orders and share positions.

Margin is held as Blocked Orders, Blocked Equity, Blocked Funds and Re-Purchase Margin.

Blocked Orders 

Cash held as security for any unfilled orders you have placed.

Blocked Equity

Cash held as security for shares you have purchased using a loan (if you have a Loan Facility).

Blocked Funds

Cash held as security for your short share, long CFD and short CFD positions. This does not include the face value of your short positions held as re-purchase margin in your Funds Balance.

Re-Purchase Margin

Cash held for your short share positions, to enable you to meet your obligations to re-purchase the shares when you Close-out each short position.

The minimum amount of margin required for each position is based on the market value of your shares and must be maintained throughout the life of the position.

The example below shows the margin required to be held as Blocked Equity for shares purchased using a loan facility:

Share Volume Share Price Share Value Margin Rate for XYZ Required Margin Amount
XYZ 1,000 $30.00 = $30,000 x 10% = $3,000

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