#NABEquityBuilder #InterestRates #Investing #NegativeGearing
Hey everyone! I’ve been contemplating taking out a loan through NAB Equity Builder to invest in BGBL and wanted to get your thoughts. 🤔 Here are some factors I’m considering:
– Interest rates seem to have hit their peak, so getting a loan now could mean benefiting from potential rate cuts and stock price increases. 📈
– The NAB EB interest rate is 10%, but there’s a special rate of 8% (although it could change). Historically, stock market returns with dividends reinvested have been higher. 💰
– With negative gearing, being in the 37% tax bracket could mean more benefits from the investment. 💸
– On the other hand, buying an apartment seems like a riskier investment with potentially lower returns over time. 🏢
What do you think? Is NAB Equity Builder a bad idea in the current interest rate environment? Any suggestions or insights on how to proceed? Let’s discuss and share our knowledge! 🤓📊
Could go up, could go down. Could stay the same.
I’ve done something similar two interest rate cycles so far. Back in the old days you’d call up your broker for a margin loan, or refinance your property.
When interest rates peak is precisely the best time to buy stocks. If you are reasoned with leverage, this is how you make generational returns.
Would you service a $6k a month loan?
Can you afford the deposit an the ongoing costs? PnI + Negative gearing is a killer at 10% over 5 years
I like the idea, but I am unsure that the numbers work and that your timeframe suits share investment
Deposit $166,666.67
Borrowing (75% LVR) $500,000.00
Loan term 5 Years
Principle Year 1 -$81,898.74
Interest Year 1 -$50,000.00
Total repayment -$131,898.74
Dividends + Franking $24,000.00
Tax loss -$26,000.00
Tax return @ 37% -$9,620.00
Profit and loss -$16,380.00
Balance sheet
Share appreciation @ 7% $46,666.67
Just Australian stocks though right?
Yes it works
Leverage amplifies returns, risk and volatility.
Let’s say you invest 100k in the ASX which has a long term gross return of 10%
– 0% leverage = $10k return 10% ROi
– 25% leverage (133k) = $13.3 return minus $2.6k interest for $10.7k or 10.7% ROi
– 50% leverage (200k) = 20k return minus 8k interest for $12k or 12% ROi
Now, if it drops 10%, it amplifies losses
– 25% leverage (133k) = $13.3k loss minus 8k interest for 21.3k loss or 21.3% loss
Now those losses/gains are on paper, but with higher leverage you run the risk of having your assets go to negative value,
So the question is, can you handle the risk and volatility.
Yeah, do it, simply because you’ll regret not doing it now.
Have you crunched the numbers for NAB EB versus an internally geared ETF? If you have enough spare income to service that $500k loan, then you have a lot to pound into a geared ETF on a regular basis, and flexibility if you want the money for something else. Plus, you wouldn’t have a loan hanging over your head if your circumstances/jobs change in the future.
>Interest rates have peaked, so if I can get the loan before interest rate cuts arrive
is it just me who finds this counter-intutitive?!
> The historic return of stock markets with dividends reinvested is greater than this.
not sure how much greater than 8% is the historic total returns. I just find their interest rate a tad too high, and the margin for error too small. You’re basically paying a 2% premium in servicing costs, for the safety of not geting margin called (let’s say you’re comparing it against Interactive Brokers).
My take, as a “safer” route, is to have property as the equity base, starting with PPOR. Then use the PPOR loan, when you have acquired enough of an offset, to buy shares (aka, debt recycling). This way, you don’t ever get margin called as well, but you don’t pay a premium for it.
You don’t have to go all out in one go do you? Can’t you take smaller loans like $100k and see how you go?