Invest
Gearing, borrowing gains traction with pre-retirees
Aussie investors are increasingly using gearing to finance their investments, a new study has found.

Gearing, borrowing gains traction with pre-retirees
Aussie investors are increasingly using gearing to finance their investments, a new study has found.

The 2018 Borrowing to Invest Report, released today by Investment Trends, has found that many Australian investors are using debt to invest in direct shares, ETFs and/or managed funds.
The report, which analysed 8,718 Australia-based online investor’s attitudes and behaviors, discovered that gearing has become a popular means of acquiring capital for investment across most investor age groups.
“Nationwide, an estimated 86,000 online investors are gearing their investment portfolio through a variety of methods, most commonly with margin lending products, line of credit secured against their home equity and home loan redraw facilities,” said John Carver, analyst at Investment Trends.
“These borrowers firmly believe in gearing’s effectiveness as a wealth creation strategy and on a net-basis agree others their age should also use leverage to achieve their goals.”
The report found that most investors who are utilising gearing are in the ‘late-accumulation stage’ of between 50 and 64 (19 per cent). This is followed by the 35-50-year-old age bracket, in which 16 per cent of online investors are using borrowings.
Millennials are the smallest group of investors using gearing, at just 5 per cent, however the report found there is significant interest from the group to begin to use debt in financing their investments. Fifty-one per cent of Millennials cited interest in using gearing this way in the future, coinciding with the report’s modelling that indicates 81,000 investors will begin utilising borrowing in the next 12 months.
“Millennial borrowers recognise many benefits of leverage-funded investing, particularly its ability to facilitate greater investment given their cash flow and ability to achieve increased diversification in their portfolios,” said Mr Carver. “These benefits are cited more often than older borrowers, who are more likely to cite negative gearing as a key advantage.
“In addition, Millennials tend to consider a wider range of lenders before selecting a margin loan provider (3.8 on average vs 2.2 for the industry), meaning that lenders must establish a wider range of hooks to attract Millennials, who tend to be more demanding.
“In particular, lenders must recognise the unique set of needs and wants of younger investors, such as their greater desire for ETFs. Those who best understand these preferences will stand out.”
Margin lending was found to be the most popular credit product for those using gearing to finance their investments, with 52,000 utilising such loans.
The popularity of this style of lending is predicted to endure for years to come, as 62 per cent of investors surveyed admitted they intended to continue using margin lending for five years or more. A further 18 per cent also said they wanted to continue such lending until they reach their wealth or savings goals.
“Margin lending investors predominantly see borrowings as a long-term investing tool, not for short-term gains,” said Mr Carver. “This is also reflected in their level of gearing, with an average margin loan LVR of 42 per cent.”
Investors indicated they saw utilising margin lending as offering good investment opportunities, with 40 per cent saying they intended to increase their margin loan borrowings to continuing investing into the future.

Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more