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Cash, courage and collateral: The share financing debate
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Borrowing to invest sounds seductive. With share financing, a modest pool of capital can suddenly feel quite muscular. As much as five times the buying power, leading to potentially higher returns and faster gains. But here’s the part investors forget: leverage is a magnifier. It does not care whether your bet was clever or careless. In this episode of Money Hacks, a podcast by The Business Times, sponsored by OCBC Securities, Howie Lim sits down with Ben Paul, senior correspondent at The Business Times, and David Kuo of The Smart Investor to unpack whether share margin financing belongs in an ordinary investor’s toolkit or in the "handle with caution" drawer. With markets being more accessible than ever, transferring shares between custodians is easier. Broker custody accounts are gaining traction and technology has lowered the friction. But has it lowered the risk?
Coordinating Producers: Howie Lim, Claressa Monteiro & Chai Pei Chieh Video production and editing by: Studio +65
graphics: HYRIE RAHMAT
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From left:
David Kuo, co-founder, The Smart Investor; Ben Paul, senior correspondent, The Business Times; Howie Lim, correspondent, The Business Times
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If you have ever wondered whether borrowing to buy more shares is a bold strategy or financial self-sabotage, this episode might just be compulsory. Watch Now. This podcast is meant to provide general information only. SPH Media accepts no liability for loss arising from any reliance on the podcast or use of third party's products and services. Please consult professional advisors for independent advice. For more episodes, visit bt.sg/podcasts. Got feedback or ideas? Write to us at btpodcasts@sph.com.sg.
What share financing actually does to your risk profile
How brokers structure margin limits and why some stocks are not marginable
The “rule of a hundred” and how cash fits into your portfolio
When leverage may make sense and when it is simply gambling
The mindset shift investors must make before borrowing to invest
Why listen
OCBC Securities
Get up to S$1,200 cash rewards and more when you transfer your shares and hold them with us. T&Cs apply.
Enjoy share financing rates from as low as 4.00% p.a. Plus, access lower online commission rates across 5 main markets with the enhanced Quality Priced Loan scheme, QPL+. T&Cs apply.
OCBC Securities
Kuo shares his verdict after trying leverage in a competition and not getting a good result. Paul offers the counterpoint from the institutional side: margin financing can be responsibly structured, but only if investors understand volatility, liquidity and collateral risk. This conversation moves beyond theory and takes into account the opinions of highly respected market watchers. What happens when markets turn? How much cash should you hold? Is market timing heresy or a smart play? And if capital preservation is your priority, does leverage have any role?
The Business Times is not licensed to provide financial advice.
Important notes This advertisement has not been reviewed by the Monetary Authority of Singapore. Trading in capital markets products and borrowing to finance transactions can be very risky, and you may lose all or more than the amount invested or deposited. Please seek advice from an independent financial adviser before committing to a trade or purchase. Regardless, you should always carefully consider the suitability of the product and any trading decision. The information provided does not consider your investment objectives, financial situation, and particular needs. For any graph, chart, formula or device, there may be limitations and difficulties in its use. Any reference to a company, financial product, asset class or figures is for illustration purposes only. For any historical information, past performance is not necessarily indicative of future performance. OCBC Securities Private Limited (“OCBC Securities”) makes no representations or warranties (including as to the accuracy, timeliness or adequacy) in respect of any information provided herein and it should not be relied upon as such. Any information provided should not be construed as personal trading recommendations or financial advisory from OCBC Securities. OCBC Securities is not responsible for any loss howsoever arising, directly or indirectly, as a result of any person acting on any information provided. All views or information expressed or provided by the speakers during or in relation to the event belong to and are that of the speakers and are for information purposes only. They do not take into account the specific objectives, financial situation or particular needs of any particular person. You should not make any decisions without independently verifying or assessing the contents.
Risk warning for Share Financing Borrowing to finance the trading of securities (leveraging/gearing) carries a high degree of risk. If the value of the collaterals declines substantially, falling below the maintenance margin requirement, you may be called upon to deposit substantial additional funds on short notice in order to maintain your position. If you fail to comply with a request for additional funds or reduce your loan within the specified time, your position may be liquidated at a loss and you will be liable for any resulting deficit in your account.
For the full disclaimer, visit iocbc.com/disclaimer.