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Margin LVR

Discussion in 'Managed Funds & Index Funds' started by MJK, 26th Apr, 2006.

  1. MJK

    MJK Well-Known Member

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    17th Aug, 2005
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    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 :D
     
  2. MrDarcy

    MrDarcy Well-Known Member

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    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.
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    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.
     
  4. MrDarcy

    MrDarcy Well-Known Member

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    Sounds like you have a structured plan and stick to it! That's something I should be working on more :rolleyes: