Good debt is the key to wealth creation

I smiled as I read in the July cover story, “Good debt, bad debt”, that 30% of new margin loan investors are 18 to 35 years old and 30% of these are women. This was me, over two decades ago!

As I started my investor journey in earnest in my late 20s, a smug comment by a real estate agent that property was the only game in town had me look for an investment approach that I could grow in my own time and at my own pace.

Leveraged investing through a margin loan met both my risk profile and my investment approach, which is taking one step at a time. The advice in your story – ensure good diversification, choose income-producing shares and have plenty of equity via a low loan-to-value ratio – is definitely my lived experience and has ensured I’ve never experienced a margin call, despite the multiple dips and corrections over these 20 years.

I’d add to this advice: be on the front foot with your margin loan provider. My trusted margin banker reminds me that during the height of the GFC, as staff were constantly on the phone chasing customers facing a margin call, I rang the bank with a plan to keep from forced sale of my shares.

It has been a 20-year learning experience that hasn’t leveraged me to huge wealth, but I’m comfortable, with my trusty annual dividend income now three times my interest bill, and an LVR of just 10%.

I was always aware that margin lending was no game. I was close to tears reading in the press about the destruction caused when leveraged wealth creation was handled in such a cavalier way by the likes of Storm Financial. In this, the final word is know your own personal risk profile and understand fully what you are undertaking. Susan