When does interest get too high for margin lending to be worth the
risk?
Q.
My managed funds will probably average 8%. My tax bracket is
31.5% - interest on my margin loan this year will possibly hit 10%.
When does interest get too high for margin lending to be worth the
risk? Would I be better off dollar cost averaging? My loan is
$250,000.
A.
If you do the sums and take into account the franking credits,
you may be surprised to discover that you can do well even if the
investments earn 8 percent and the loan is costing you 10 percent.
Dollar cost averaging is a great strategy if you are unsure of
where the market is heading and want to take a conservative
approach.
Each week financial advisor Noel Whittaker answers your
questions.
