Aussies borrowing to invest, but conservatism still reigns

Aussies borrowing to invest, but conservatism and blue chip shares still reign

Margin lending is once again on the rise. The practice, which involves customers borrowing money from institutions such as CommSec …

Catherine Baab-Muguira

Catherine Baab-Muguira is a Fool.com.au analyst/writer. A Fool since 2010, she comes at investing by way of being a compulsive reader and has a keen eye for detail from years of working as a freelance journalist. In 2012, she joined the Motley Fool's Analyst Development Program to pursue her love of investing full time, and worked as an analyst on one of The Motley Fool’s US services before heading down to Australia. A graduate of the University of South Carolina and the University of Auckland, she has lived and worked all over the world, including year-long stints in Singapore and New Zealand. Hence her great love for nyonya laksa and the All Blacks. We’ll forgive her that last one!

Published April 8, 2013 10:34 am AEST

Margin lending is once again on the rise.

The practice, which involves customers borrowing money from institutions such as CommSec to buy shares or managed funds, last saw activity levels spike in the bull market of 2009. During that year, the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) rose by some 30%. By way of comparison, the index has climbed around 13% over the last twelve months.

Today, between rising bullish sentiment in the share market and low interest rates, investors are once again diving in, with the average loan size around $65,000. CommSec reports that in just the last three weeks, it has written some $75 million in new loans, representing a "strong uptick".

Yet reassuringly, according to The Sydney Morning Herald, "The total value of margin loans remains a fraction of previous highs, and gearing levels are much lower than before the global financial crisis".

Investors are also opting for somewhat more conservative investments, with some of the most popular shares include high-yielding blue chips such as Woolworths (ASX: WOW), Wesfarmers (ASX: WES), both up over 30% in the last twelve months, and the nation's largest banks, including Commonwealth Bank (ASX: CBA) and ANZ (ASX: ANZ), up 34% and about 20% respectively, over the same period.

But do these shares really represent the market's best opportunities? In fact, many savvy investors are now seeking growth in smaller companies well outside the ASX 20. Discover two stellar small-cap opportunities now, in our brand-new research report, "2 Small Cap Superstars" — simply click here to download your FREE copy.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

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