Some mutual funds like Colonial First State Geared Share Fund gear internally. You give money to Colonial First State and they borrow and invest for you. If you gear normally (or externally, as I will call it) then you yourself borrow money from the bank and invest in an ordinary fund or in property, etc. Suppose you got a job that pays $x per year. If you went to the bank, took out a loan, and borrowed money to put into a normal Australian shares fund, would you make the same money as if you put $x per year into an internally geared share fund like Colonial First State Geared Share Fund? Are they equivalent? If they are, why would anyone bother with the hassle of external gearing? For example, instead to borrowing money from the bank to invest in an investment property, why not put money into a geared unlisted property trust, which would offer more diversification? I don't know of any geared unlisted property trusts in existence though. If the fund manager borrows on your behalf, they might charge a fee for that service. On the other hand, they may get quantity discounts.