Glossary
Margin Lending - Glossary
Buffer
Every investment has risks. Margin Lending is no exception. However, to help protect you from fluctuations in the share market that could result in a margin call the following buffers are currently 'built-in' to the value of your investment:
- 5% for shares with a gearing ratio of more than 75%
- 10% for shares with a gearing ratio of 75% or less
- 10% for managed funds
It is expected that whilst you are in buffer you take action to bring your account back below the appropriate gearing ratio to help manage your risk of being in a margin call.
Franked Dividends
Franked dividends are dividends (profit payments) paid to shareholders on which corporate tax has already been paid. Effectively this gives the shareholder tax credits that can be offset or claimed against their personal income tax liability.
Gearing
Borrowing funds to leverage or boost your investment power.
Line of credit
A loan, similar to an overdraft, which enables you to withdraw and repay funds from time to time, within an authorised limit, without having to make regular repayment of capital.
Margin call
A margin call occurs when falls in the value of your security cause your current loan balance to exceed your borrowing limit plus your buffer. If this occurs you must repay part of your loan at the time and on the day we indicate you must meet the margin call (normally by 1.30pm Adelaide time on the day after you have been notified).
Negative gearing
The ability to claim a tax deduction for 'shortfalls' experienced when the expenses incurred in holding an investment are greater than the income earned from that investment.
Security
The value of the cash or investments you provide to secure your loan.