The main benefit of margin lending is the ability of it to increase your exposure to the stock market. In other words, you have a great deal more money to invest than you would if you relied solely on your own savings. This is known as gearing your investments. Gearing increases you flexibility as you can switch holdings within your investment portfolio.
When properly understood and administered, margin lending provides a good means of investment. While it poses more risks than some other investments, steps can be taken to minimise those risks and bring them down to an acceptable level. Margin lending gives you liquidity as you can access your funds by selling off some of the assets.
With margin lending, you can start small, unlike borrowing for other investment purchases such as property. In some cases, the interest you must pay on your margin lending can be claimed as a tax deduction. If you borrow against an asset you already have, then you may be able to avoid Capital Gains Tax. Australian shares may entitle you to franking credits that may be used to offset some of the tax payable.
