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The greatest advantage of owning investments/assets is ability to place them as security to borrow money to create more wealth. By having your investments directly in shares with Matlotlo, allows for Matlotlo to lend you up to 50% of your share portfolio (at prime lending rates) for investment in shares on a medium to long term term basis. You are only required to service the interest of the loan on a monthly basis.

This strategy is attractive in the current environment of depressed share prices. Over a three year period, one could increase wealth by 95% of initial borrowed funds. Herewith an example:

 

Initial portfolio and borrowing

Initial share portfolio size (div yield of 3%)

R 100 000

Borrowing capacity

R  50 000

Investment in shares (div yield of 6%)

R  50 000

Total share investment portfolio

R 150 000

 

Financing interest cost on borrowing

Annual interest cost (prime of 15%)

R    7 500

Dividends on portfolio (3%xR100k+7%xR50k)

R    6 000

Net annual interest service (R7.5k-R6.5k)

R    1 500 (R125 per month)

*No annual net interest service requirement after 2 yrs as dividends increase
 

Wealth created attributable to strategy

Likely value of borrowed funds (at 25% pa return)

R  97 600

Less repayment of capital on borrowed funds

R  50 000

Wealth created from gearing strategy

R  47 600
(95% of initial borrowing)

 
For more on implementing this gearing investment strategy, contact us on info@matlotloonline.co.za.
 
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