MARGIN LENDING
Margin lending is a form of leveraging - borrowing against your existing assets to invest in the market.
A margin loan multiplies the effects of gains from rising security values, however, it also multiplies the risk of loss from falling security values.
You should understand the following risks in relation to margin lending:
- interest must be paid on the amount borrowed - you need to make sure you can service the interest repayments;
- if the market value of the investments you hold as security for the loan falls, you may be required to make a margin call; and
- you may have some or all of your securities sold by the margin lender provider if you fail to make margin call payments or provide additional security as and when required.
It is important to note that leveraging is not suitable for all investors, and needs to be considered in relation to your individual investment objectives and personal circumstances. Any assessment of the appropriateness of leveraging to a particular client needs to be undertaken in consultation with the client's own accounting, taxation and/or legal adviser.