Borrow To Invest: Managing the Risks
Managing your loan during market volatility
You may have considered taking advantage of investment opportunities presented by a volatile market, such as purchasing additional shares if they are trading at a lower price. It’s important to manage your RHB Bank SMF facility, and this is especially true during times of share market volatility. There are a number of steps you can take to help reduce your risk and prevent a margin call.
- Invest in good quality shares and maintain a long-term view. You should expect peaks and troughs in the market, but if your investments are sound you may have a lower chance of a margin call during dips.
- Monitor your RHB Bank SMF facility. By regularly checking changes in your portfolio value, Security Value and loan balance, you can better manage the chance of receiving a margin call.
- Reduce your gearing ratio. Gearing conservatively reduces your risk of a margin call if the market drops.
- Review your portfolio composition. The greater your diversification across a broad range of shares the less risk there is from any one stock or sector.
- Inject cash into your portfolio. To decrease your gearing ratio, consider injecting cash into your portfolio
- Re-invest your dividends or offset them against your loan balance. Over time, this can help reduce your gearing level.
Employing some simple strategies and discipline can help you ride out the dips and enjoy the long term growth of the share market.
If you need more information, please speak to our staff in SMF Department on 03-92802982, 9am-5pm, Monday to Friday.
You should be aware that while leveraging into investments increases the potential return on investments, it can also multiply the effects of falls in the share market values. This material does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. RHB strongly recommends that you talk to your financial advisor and ensure you understand the risks, the specific tax implications, as well as the legal and financial ramifications of a margin lending facility.
Information provided by RHBInvest
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*All orders are subject to our standard vetting process before they are placed on the market. We do not guarantee that your order will execute.
The information above, including illustrative studies, has been prepared by the Margin Lenders concerned. None of this information should be construed as a recommendation by RHB Investment Bank Berhad and RHB Investment Bank makes no warranty as to the accuracy or completeness of its content. RHB Investment Bank accepts no liability for any loss caused by use of any of the information included in this document. Each user will need to consider their own investment objectives, financial situation and particular needs before acting upon any of the information provided herein.
Please be aware that while leveraging into investments increases the potential return on investments, it is important to recognize that it can also multiply the effects of falls in share market values. You should seek professional advice before applying for a share investment loan or margin loan. |
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