Why use gearing?
Whether they're entering the sharemarket for the first time, looking to accelerate their wealth creation or building wealth for retirement, gearing can help your clients achieve their financial goals sooner.
By borrowing to invest, your clients can enjoy a range of benefits, including:
The potential for greater returns
- Gearing provides your clients with more funds to invest - potentially magnifying their returns.
Up-front opportunity
- Gearing can allow your clients to have more money working for them sooner, without putting in a large amount of their own funds.
Portfolio diversification
- A spread of investments reduces risk for your clients. A larger portfolio usually means a better quality portfolio too.
Financial flexibility
- Together with your clients, you can decide on a preferred level of gearing at the outset, or adjust it over time to suit their stage of life.
Economies of scale
- Having more funds to invest can reduce the impact of transaction costs, which are sometimes a barrier for small investors.
Potential tax efficiencies
- Your clients may be entitled to claim loan interest as a tax deduction against investment earnings and other taxable income earned during that year.
A larger portfolio, a better spread, more opportunities, lower transaction costs and potential tax efficiencies - it all adds up to a more dynamic investment strategy.