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Power of gearing

What is gearing?

Borrowing to invest using existing investments as security is called 'gearing'. It's a simple tool you can use to build your wealth.

Regular gearing combines a regular investment plan with an investment lending facility. It gives you the advantages of regular saving combined with the advantages of gearing.

It is also a simple and automatic way to drip-feed money into investments, so you can take advantage of 'dollar cost averaging', i.e. buying more when the market is down and less when the market is up.

Benefits of gearing

Gearing can be beneficial if it enables you to:

  • Gear your savings to build your wealth faster
  • Invest more money for potentially higher returns
  • Improve risk management by diversifying your investments
  • Take advantage of potential tax deductions.

Benefits of regular gearing

Regular gearing offers all the benefits listed above plus:

  • It allows you to invest more money more frequently
  • You can double the amount you invest each month
  • It provides an automatic and simple approach towards achieving your goals.

Risks of gearing

Gearing can magnify losses as well as gains. The risks you need to consider include:

  • A fall in the value of your investments may occur however the loan balance remains
  • Interest costs may outweigh investment returns, thereby impacting your cashflow
  • Where a margin loan is used, a margin call may occur, requiring you to add more funds or sell your investments.

Gearing options and investment loans

A Westpac Online Investment Loan may suit investors wanting an integrated share trading and investment loan facility.

A Westpac BlueChip20 may be appropriate for investors new to the share market or are looking to increase the diversity in their investment portfolio with shares in the top 20 Australian companies.

Things you should know

The information on this website has been prepared without taking account of your objectives, financial situation or needs. Because of this, you should consider its appropriateness, having regard to your objectives, financial situation and needs and, if necessary, seek appropriate professional advice. If a Product Disclosure Statement is available in relation to a particular financial product, you should obtain and consider that Product Disclosure Statement before making any decisions about whether to acquire the financial product. The information contained on this website does not constitute the provision of advice or constitute or form part of any offer, solicitation or invitation to subscribe for or purchase any securities or other financial product nor shall it form part of it or form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any securities or prices used in the examples on this website are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not a reliable indicator of future performance. This website may contain material provided directly by third parties. This information is given in good faith and has been derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group nor any of their related entities, employees or directors (together, "Westpac"), nor the Participant, accepts responsibility for the accuracy or completeness of, or endorses any such material. This website may also contain links to external websites. Westpac and the Participant do not accept responsibility for, or endorse the content of, such external websites. Except where contrary to law, Westpac and the Participant intend by this notice to exclude liability for material provided directly by third parties and the content of external websites.