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Margin Call Potential

Discussion in 'Managed Funds & Index Funds' started by evisional, 13th Nov, 2007.

  1. evisional

    evisional Well-Known Member

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    Melbourne
    My margin loan with comsec just steped into buffer level; and potentially I have a margin call if market continuely falls down. Unfortunately, I bought Challenger China Share Fund when the price on the top. If I redem this fund units, I will get lost. Please note that I have insufficient fund to put into the margin loan at this time.

    In my portfolio, I have held some Perpetual Geared Australian Fund for 2 years and have unrealised CG. Should I sell Perpetual Geared Australian (CG) or Challenger China Share Fund (Loss) in case of margin call?

    Do you have any strategy to minimise the loss?
     
  2. crc_error

    crc_error The Rule of 72

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    I would hold out as long as possible, and only sell what you HAVE to sell. Probably sell down some of your profit..

    If you invest into volatile funds, then its best to keep LVR closer to 50% so you can ride out these times..

    I got caught with Platinum Asia 2 weeks ago, and its fallen 6% since! can't believe I get my timing wrong all the time!
     
  3. dkmc

    dkmc Well-Known Member

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    Maybe what you invested in is too higher risk profile for you
    Had you not modelled for 10-15% drops in the market? esp for china funds and geared funds on margin

    As a long term solution
    You maybe better off reassessing your risk, and changing your asset allocation to something that is more reasonable


    Otherwise whatever you do in the short term you may be faced with the same situation 1 month later
     
  4. Billv

    Billv Getting there

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    My strategy was to get out as early as possible.
    I was hoping for a soft landing, but it's not looking good.
    Cheers
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I would tend to sell off the worst performer first - limit future losses if things get worse and avoid realising a capital gain which will see you paying tax (unless your strategy was to lock in profits).

    But don't sell unless forced to ... you may get away with just holding through the volatility without having to realise any losses.

    I think either way, you need to make a decision about your strategy and stick to it ... are you going to run to cash when things look shaky ... or are you going to hold through the turbulence (selling only if forced to) and look to the long term ? If you equivocate, you'll probably just end up making a mess of things.
     
  6. crc_error

    crc_error The Rule of 72

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    I think he should lower his exposure to the China fund if he has to much exposure to it for his liking.. but remember if you do sell it down, the market needs to run alot harder to make back the loss since now you have a smaller holding..