I'm in the final stages of setting up my Margin loan at 50% LVR. Funds available are 70% LVR. Temptation is to back yourself and go to at least 60% in this economic environment. So I wondered where people are leveraged to in their margin loans? Are most seasoned Stock market investors firm with lower LVR's? MJK
I start with 50%. But as I let the interest get capitalised to the loan, I want to have an extra safe buffer. After 2 years I'm still not over 50% LVR on Navra, but I monitor closely. I'm happy with 50% leverage, it's making that dollar work enough.
I aim to stay around 10 - 15% below my maximum LVR. When all my funds had a max LVR of 70%, this meant I aimed to keep my loan around 55% to below 60%. Now that some of my funds have a lower max LVR, I base it on my calculated maximum LVR for the portfolio. However, I pay all interest costs out of my own cashflow - I don't capitalise. I'm happy to maintain a higher LVR because I have the excess cashflow available to pay the interest costs, and enough cash elsehwere to meet any unexpected margin calls. If you don't have that flexibility, then a lower LVR might be prudent. If my LVR drops to more than 15% below my max LVR, I borrow more to increase my investments and bring it back to up close to 10% below my max LVR. I'm still in accumulation mode, but once I've reached my capital allocation target for the funds, I will let the LVR drop to below 50% to provide a bigger buffer.
