Gearing is the strategy of borrowing money to invest. Just as you take out a loan to buy a home, you can also borrow money to invest in other assets, such as shares, property or managed funds.

Gearing enables you to boost your investment earning power by increasing the amount of money you have available to invest. While investing with someone else’s money sounds like a great strategy (and it can be), there are risks involved, so it’s not suitable for everyone.

Prestige Wealth Partners makes gearing strategies easy to understand and easy to implement.

Generally, to be effective a geared investment should:

• generate a reliable long-term income flow
• generate capital growth that exceeds inflation over the medium to long term
• be highly diversified with a number of individual investments
• be considered for investment time frames of five years or more
• draw on stable and reliable cash flows to meet the pre-tax borrowing costs.

Things to consider about geared investments:

• Who is gearing appropriate for?
• What are the benefits and the risks?
• What is the difference between positive, negative and neutral gearing?
• What is home equity gearing?
• What is margin lending?
• How do I repay a geared investment loan?
• What is a Loan to Value Ratio (LVR)?
• How does gearing affect my tax?

Rebecca Newton Financial Planner has the answers!

cforms contact form by delicious:days