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Glossary
Buffer
Every investment has risks. Margin Lending is no exception. However, to help protect you from fluctuations in the share market that could result in a margin call the following buffers are 'built-in' to the value of your investment:
- 5% for shares with a gearing ratio of more than 75%
- 10% for shares with a gearing ratio of 75% or less
- 10% for managed funds
Franked Dividends
Franked dividends are dividends (profit payments) paid to shareholders on which corporate tax has already been paid. Effectively this gives the shareholder tax credits that can be offset or claimed against their personal income tax liability.
Gearing
Borrowing funds to leverage or boost your investment power.
Line of credit
A loan, similar to an overdraft, which enables you to withdraw and repay funds from time to time, within an authorised limit, without having to make regular repayment of capital.
Margin call
A margin call occurs when your amount borrowed exceeds your borrowing limit by more than the allocated buffer zone. (5% for shares and 10% managed funds)
A margin call generally arises because of falls in sharemarket value, but can also be triggered because your level of borrowing has increased due to the addition of interest or other charges relating to your margin lending facility.
Negative gearing
The ability to claim a tax deduction for 'shortfalls' experienced when the expenses incurred in holding an investment are greater than the income earned from that investment.
Security
The value of the cash or investments you provide to secure your loan.
