Managed Funds margin loan against NI - what LVR's are people doing?

Discussion in 'Shares & Funds' started by transit, 31st Jul, 2007.

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  1. Simon Hampel

    Simon Hampel Founder Staff Member

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    You shouldn't face a margin call from a distribution if you reinvest the units. The reinvestment calculation is usually done as of the first day of the new distribution period (or using the post-distribution figure before the first day of the new period). What's more, many fund managers don't complete the distribution calculation for a week or so after the end of the period - so it means it takes even longer for the data to be updated.

    Margin lenders know this happens - and some of them only update their unit holding figures once a month - so even if their online systems report you having less units - that's just because they are not yet updated.

    If you margin lender complains about your LVR during the pre-update period (they shouldn't), you need to tell them to bugger off and update their data first.

    Recently I wanted to draw down on my margin loan, but the system hadn't yet calculated my recent fund purchases, and was using unit prices that were at least a week old ... I received an email from my margin lender saying that I didn't have enough buffer to make the draw-down, I replied telling them that their system was not up to date and that I really had plenty of buffer, and then they processed the transaction without further comment.

    It helps if you have accurate records of your own rather than relying on the margin lender to keep track of the value of your holdings.
     
  2. SugarFreeGum

    SugarFreeGum Member

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    VIC
    67% LVR and capitalised interest here.

    I'm young and aggressive though :)
     
  3. craig__

    craig__ Member

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    1st Jul, 2015
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    Location:
    Brisbane, Qld
    Hi
    bundy1964, how are you doing with the latest downturn with your maximum lvr? have you had a margin call yet?
    I'm only 55% lvr myself.

    Craig.
     
  4. crc_error

    crc_error The Rule of 72

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    I like how when your young, your LVR is high, but by the time your 60, LVR is LOW:rolleyes:

    Prehaps years of riding crashes etc. you become less aggressive in ones older age!

    I'm sitting at 55%
     
  5. bundy1964

    bundy1964 Well-Known Member

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    Adelaide, SA
    I had a call so just borrowed a few shares to cover myself....no big drama and it only just went over.
     
  6. MichaelW

    MichaelW Well-Known Member

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    25th Jun, 2015
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    Location:
    Brisbane
    Hi MCM,

    I actually have my Navra managed funds in the same HDT as my investment property. This is not what would be recommended by the HDT pundits, because it doesn't separate the positive income from the negative gearing assets. If separated then the NG benefits can be passed out to the high income earner, and the positive income profits distributed to the low/nil income earner to take advantage of low tax thresholds.

    However, I have moved to a more conservative accountant who I rate highly. His view is that one structure (and he would have recommended a standard DT instead of a HDT) is more appropriate and he never liked the idea of passing NG deductions out of the structure. In this way, my NG deductions are offset by my passive MF income and I declare a small actual profit from investments each year. That is taxed at the 30% corporate rate and then passed out to my wife on her nil salaried income.

    His view, and I share this view, is that my company is a wealth creation vehicle and I should include all my investment assets in that vehicle regardless of their role (cash flow or growth). He also feels it is important to declare a profit, as I continue to do, in most years so that the structure is "working" from an ATO perspective. i.e. they like to see taxed profits and not some tricky tax-dodge structure crafted for that purpose with no wealth creation intent. Declare your net profits and pay your taxes!

    Hope that helps.

    Cheers,
    Michael.
     

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