When does interest get too high for margin lending to be worth the
risk?
Q.
I have a margin loan of $250,000. My managed funds will probably
average 8%. My tax bracket is 31.5%, and 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?
A.
The biggest factor influencing the outcome is the potential gain
or loss in the portfolio. For example, if the portfolio gains 10
percent in a year you will be well in front when you take into
account the tax deductibility of the interest. You are the only
person who can decide when is the most appropriate time to enter
the share market.
Each week financial advisor Noel Whittaker answers your
questions.
