GEARING YOUR INVESTMENT
	Your financial adviser may recommend that you accelerate your investment capacity by combining your equity with borrowed funds. Gearing works on the principle that more money makes money. Many people are familiar with gearing as a strategy where you borrow against the equity in your home to fund the purchase of a rental property, Likewise, gearing is an investment strategy in borrowing money to increase your returns. Working on the assumption that the historic performance of the share market will continue into the future, it is reasonable to expect that the total rate of return, from a portfolio will be much greater in the long term than the cost of borrowing money. In addition, the cost of borrowing money may be a tax deduction, although this should not be the main focus of you investment. Essentially, by combining borrowed money with your own, you can greatly increase your exposure to market growth. However, you must be prepared to invest for the long term and accept the potential risks. Because your investment is subject to the fluctuation of the share market, if at anytime the value of your investment falls, you may be subject to a "margin call", and be required to make an immediate loan repayment or invest additional money. Whether or not you will be subject to a "margin call" depends on, amongst other things, the ratio of the amount of security you have against the amount of money on loan. This is called your LSR (loan to security ratio). If the value of your investment falls, and the LSR exceeds your allowed limit, the margin lender will make a margin call, which is a demand that you either invest additional money or make an immediate loan repayment. To minimize the likelihood of a margin call, you should either borrow less money to keep the LSR well below the upper limit, and make sure you have enough cash reserved to deal with a margin call.