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SMA (UBS HALO) and Margin Loan

Discussion in 'Shares' started by Flipper, 21st Jan, 2014.

  1. Flipper

    Flipper Member

    29th Aug, 2009
    Sydney NSW
    Hi all,

    Have an SMA under the UBS HALO banner and linked margin loan with up to 75% LVR available.

    Currently there is nothing on the margin loan (in fact several k sitting in CR) so it is quite tax inefficient. Long story of how this happened but not really relevant for the below.

    Present thinking is to gear up the margin loan to about 50% LVR and then add to the total SMA via additional purchases dollar cost averaging (at that LVR) each month.

    My concern is that the ASX (particularly these equities) seems to be fully valued at the moment - meaning I'm not really getting the best bang for buck on large parcels (these purchases would be made over about 6 weeks to achieve at least SOME dollar cost averaging).

    Otherwise, should I hold out for a more substantial correction and try to get a better overall price? The catch being that the value of the underlying securities will have also moved south so there would be less in the tank for a loan to be secured against.

    Alternative option is to sell it all, reinvest directly in an LIC (along with dividend reinvestment, margin loan and monthly contribs)... Obviously this would trigger a CGT event but may be worth it in the long run to lower fees etc etc.

    I suppose in real terms I would be worse off in the first scenario if there is a correction as I would have a loan of say around 100k, and equities worth 80K linked to that loan but waiting for something that may/may not occur isn't going to save me money either as there is no tax efficiency at all.

    Any thoughts?

    I understand anything on invested doesn't (ever) constitute proper financial advice but am interested in differing views.