Case study

Creating Wealth

Sam has accumulated $50,000 in savings and would like to use these funds to start an investment portfolio. Sam's financial adviser suggests she borrow an additional $50,000 through a Macquarie Margin Loan, so she has more funds to invest and can potentially magnify her returns.

The graph below illustrates the gross value of Sam's portfolio over the next five years if she invested using a margin loan, compared with her investment if she invested only her own funds.

The graph below illustrates the net value of Sam's portfolio over the five year period, after allowing for capital gains tax and the repayment of the loan.

The result

By using a Macquarie Margin Loan, Sam has an additional $13,779 in investment capital at the end of the five year period, after allowing for capital gains tax and repayment of the loan. This increase has been achieved as a result of capital growth only as dividends were used to meet gross borrowing costs.

This case study is a hypothetical example only. Due care and attention have been used in the preparation of forecast information and hypothetical examples. However, actual results may vary and any variation may be materially positive or negative. Past performance is not an indicator of future performance.

In preparing the above case study, it has been necessary to make certain assumptions. These are: A five year investment timeframe applies. Investment return is 9% p.a. (split 4.5% income and 4.5% growth). A franking level of 74% applies to income, and the investor is fully eligible for franking credits. Dividends received are used to cover interest payments and any surplus is not reinvested. Interest on the Macquarie Margin Loan is 10.50% p.a. and a marginal tax rate of 46.5% (including Medicare Levy) applies.

The Macquarie Margin Loan is offered by Macquarie Bank Limited ABN 46 008 583 542 ("Macquarie"). Full terms and conditions can be found in the loan contract. Fees, charges and government charges are payable. Information, including forecast financial information and hypothetical examples, should not be considered as a recommendation in relation to holding, purchasing or selling shares, securities or other instruments in, or entities related to Macquarie or any other company.