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- The door has opened for gearing in super
The door has opened for gearing in super
- By Daniel Minihan
- Published 9/01/2009
- Investment Insights
- Unrated
Thinking now might be a good time to invest? Gearing in super has the potential to accelerate your super ... provided you've got an appetite for risk.
In September 2007, the Government opened the door to gearing within super - meaning it's now possible to borrow to invest in a broad range of investments inside your self-managed super fund.
With greater buying power, it opens up a range of new investment opportunities you may otherwise be unable to contemplate. Consider the simple example below of a $100,000 initial investment geared to 50 percent with borrowings of $100,000, giving $200,000 to invest. If we assume a rate of return of 12 percent and an interest rate of 9 percent, over 20 years the investment could look like this.
If this investment had no gearing it would grow to around $575,000 over 20 years, which compares to $735,000 with gearing (and regular repayments through the term), or $770,000 if the borrowings are paid off in a lump sum at the end.
Whilst this is a simple example, it demonstrates the power of gearing and how it can be used as a long term wealth accumulation strategy.
There are also risks associated with gearing as falls in the value of your portfolio can be magnified and can result in margin calls. For more information on whether gearing in super is right for you, call Daniel Minihan on 9614-4444 to make an appointment.
The information contained here in is prepared on the understanding that it neither represents nor is intended to represent advice or that Moore Stephens Consulting (Melb) Pty Ltd, Moore Stephens Melbourne Pty Ltd or Moore Stephens Charted Accountants is enganged in rendering legal or professional advice. The information is of a general nature only and has been provided withouth taking into account your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whtether the information is appropriate in light of your particular needs and circumstances.
In September 2007, the Government opened the door to gearing within super - meaning it's now possible to borrow to invest in a broad range of investments inside your self-managed super fund.
With greater buying power, it opens up a range of new investment opportunities you may otherwise be unable to contemplate. Consider the simple example below of a $100,000 initial investment geared to 50 percent with borrowings of $100,000, giving $200,000 to invest. If we assume a rate of return of 12 percent and an interest rate of 9 percent, over 20 years the investment could look like this.
If this investment had no gearing it would grow to around $575,000 over 20 years, which compares to $735,000 with gearing (and regular repayments through the term), or $770,000 if the borrowings are paid off in a lump sum at the end.
Whilst this is a simple example, it demonstrates the power of gearing and how it can be used as a long term wealth accumulation strategy.
There are also risks associated with gearing as falls in the value of your portfolio can be magnified and can result in margin calls. For more information on whether gearing in super is right for you, call Daniel Minihan on 9614-4444 to make an appointment.
The information contained here in is prepared on the understanding that it neither represents nor is intended to represent advice or that Moore Stephens Consulting (Melb) Pty Ltd, Moore Stephens Melbourne Pty Ltd or Moore Stephens Charted Accountants is enganged in rendering legal or professional advice. The information is of a general nature only and has been provided withouth taking into account your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whtether the information is appropriate in light of your particular needs and circumstances.