Gear modestly

by Matt

Peter says to buy 1 year worth of dividends with a loan (say a margin loan for example if dont have a house). So If I buy $1000 of xyz company that pays 5% dividend, Peter recommends loan ... $50? Is there even any point to that haha?

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Sep 06, 2020
by: Mike

Hi Matt,

We would be highly cautious about gearing at all. As we've seen this year (2020) with Covid, dividends are not predictable and seemingly safe ones can be switched off with little warning. Gearing on margin is particularly dangerous as you can be asked to add cash when markets are plummeting (or otherwise your securities are sold). We think you should aim to build up a collection of diverse, cash generating assets that allow you to sleep well at night. Remember the world is highly unpredictable and always will be. Focus on high quality assets, cash generating assets, at reasonable prices, remain patient, and keep a steady temperament. Far easier said than done!

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