Typically, a geared share portfolio should consist of stocks that pay dividends as well as providing capital appreciation over the longer term. In other words, you should be aiming to positively gear. Particularly for people looking to gear into shares or managed funds, you must be able to tough out the daily fiuctuations in the value of your investments. There will be plenty of times in the market when your shares or managed funds will be losing you money. They will see the value of their share portfolio going up and down on a daily basis.
Properties fiuctuate in value every day just like a share portfolio.
Most planners regard gearing into shares, managed funds and investment properties as suitable investment strategies for people who have either cleared, or are nearing the completion of their mortgage repayments. It's suitable for higher income earners who benefit from the tax deductions of negative gearing and who have a number of years until retirement. Gillian O'Mulloy, the head of BT Margin Lending, says gearing used to be for more sophisticated, older clients, but now she's seeing an infiux of younger investors who are attracted to the ease and accessibility of margin lending. But the experts stress that gearing is a long-term strategy. Just as you don't buy property for six months, you don't gear into shares for short periods of time.