A Personal Finance Blog for Malaysian: How to leverage (using Other People Money) in Share Investment?

Monday, October 18, 2010

How to leverage (using Other People Money) in Share Investment?

Leverage is the power of using other people money or time to your advantage. You can leverage in Property Investment by borrowing up to 90% of the property value. Now, you can also leverage in share investment, it is called "Share Margin Financing".

Currently, banks can offer very good financing scheme at BLR-1.0% or even lower (subject to certain conditions). Let say your share investment portfolio has few counters with market value of RM100,000 - you can borrow up to 65% of the approved market value (around RM60,000). So, with the SMF,

  1. You can invest more and get more return. 
  2. You can keep it stand by for bargain buy (when certain stock crash or stock market crash).
  3. You can advance cash for your holiday while keeping your share to earn dividend and appreciate.

Do NOT use SMF for highly volatile shares.
Do NOT use SMF when you have problem settling the margin call (i.e. when share price drops and your loan ratio exceeds 65%, you need to pump in cash to keep to loan ratio back to 65%).

Click here to open the a Share Margin Financing account.