TheCommonwealth Bank’sonline stockbroker, CommSec, has launched a margin lending product direct to investors that will combine margin loans with a savings plan to allow regular investments in shares or managed funds.
Called the CommSec Margin Loan with Regular Gearing, it appears to be targeted at unsophisticated investors who will be making a minimum monthly investment of $250.
For each dollar the investor contributes, CommSec matches this with a dollar so that the capital is doubled. Investors must open their portfolio with a minimum of $2000.
“Using this strategy, you can quickly build a surprisingly large portfolio, without needing a lot of capital up-front,” Commonwealth Bank head of premium financial services Mike Katz says.
Katz says a safety mechanism has been built into the product which protects against margin calls which are the typical risks associated with such products.
“Because this product has been designed to give you a gearing level of only 50 per cent, the market value of your investments would have to fall by one third before a margin call was triggered,” Katz says.
“We’ve also built in some safeguards to stop your gearing level from creeping up. If it reached 55 per cent of the value of your portfolio, we automatically stop drawing down loan instalments until it has corrected itself.”
As part of the product launch, investors who invest directly into a suite of 100 approved funds through CommSec Direct Funds will have some or all of their entry fees rebated.
“Depending on the fund, we’ll rebate up to 100 per cent of the entry fee,” Katz says.
