There are a range of strategies that can be used to pre-define entry and exit points for a given security, including Falling Sell, Rising Buy, Falling Buy, Rising Sell, Trailing Buy and Trailing Sell.

Falling Sell (Stop Loss)

A Falling Sell may help you lock in gains or limit losses in a falling market. A Falling Sell order may help you to sell some or all of your client’s holdings in a company if the security price falls to the level you have set as your trigger.

Example

For example, you buy 1,000 units of XYZ Ltd at $10 per unit. You want to limit the losses of your investment, so you set a Falling Sell Trigger at $9.50, with a Falling Sell Limit Order to sell your units at no less than $9.43.

In this example, the market price for XYZ Ltd reaches $9.50 and your limit order is submitted to the market* to sell XYZ Ltd at no less than $9.43 per unit. Your stock will be sold if there are sufficient buyers in the market willing to buy at a price of $9.43 or higher.

Rising Sell (Take Profit)

A Rising Sell may help with taking a profit when a security price rises. A Rising Sell order may help you to sell some or all of your holdings in a company when the security price rises to the level you have set as your trigger.

Example

For example, you have been watching the price of XYZ Ltd, which has been trading at $4.00 per unit and appears to be rising. You could set a Rising Sell Trigger with a trigger price of $4.40 and a limit price of $4.33.

In this example, the market price of XYZ Ltd reaches $4.40, your limit order will be submitted to the market* to sell XYZ Ltd at no less than $4.33. Your stock will be sold if there are sufficient buyers in the market willing to buy at a price of $4.33 or higher.

Rising Buy

A Rising Buy may help you take advantage of a security that's on the rise. A Rising Buy order may help you to buy a security when the unit price rises to or above the level you have set as a trigger. You also set a limit price above the trigger price (setting the maximum price you are willing to pay for the security).

Example

For example, you are researching the security price of XYZ Ltd, which is currently trading at $9.10 per unit. Your charting analysis shows that if the price rises to $9.15, it is likely to continue to rise beyond that due to momentum in the security. You could set a Rising Buy Trigger at $9.15 along with a Rising Buy Limit Order at $9.19.

In this example, if XYZ Ltd reaches a price of $9.15 or higher in the market, your limit order will be submitted to the market* to buy XYZ Ltd at no more than $9.19 per unit. Your order will be fulfilled if there are sufficient sellers in the market willing to sell at a price of $9.19 or lower.

Falling Buy

A Falling Buy may help you invest in a company when its share price falls. A Falling Buy order may help you to buy a security when the unit price falls to or below the price you have set as a trigger. You also set a limit price above the trigger price, setting the maximum price you are willing to pay for the security.

Example

For example, you have been watching the price of XYZ Ltd, which has been trading at $3.10 and appears to be declining. You could set a Falling Buy Trigger with a trigger price of $2.80 and a limit price of $2.85.

In this example, if XYZ Ltd trades at $2.80 or lower, your limit order will be submitted to the market* to buy XYZ Ltd at no more than $2.85 per unit. Your order will be fulfilled if there are sufficient sellers in the market willing to sell at a price of $2.85 or lower.

Trailing Buy

A Trailing Buy may help you maximise value when investing in a company. It may help you to buy a security when the unit price falls to or beyond a level you have set as your client’s trail start price and then experiences a rise equal to or greater than the trail stop value you have set. If the security price does continue to fall, your Trailing Buy monitors for new lows and will not trigger until a rise of at least the trail stop value from the lowest price since trailing started.

Example

For example, you have been watching the price of XYZ Ltd, which has been trading at $3.10 per unit and appears to be declining. You could create a Trailing Buy Trigger with a trail start price of $2.90 and trail stop value of $0.10.

In this example, the market price of XYZ Ltd falls to $2.90, and then experiences a rise of $0.05 to $2.95 before falling again. Because the trail stop was set at $0.10, the order did not fire. XYZ Ltd then falls to a low of $1.90 before rising by $0.10 to $2.00 which meant the market order fired at $2.00.

Trailing Sell

A Trailing Sell may help with maximising a profit when a security price is rising. It may help you to sell some or all of your clients’ holdings in a company when the security price rises to, or beyond a level you have set as the trail start price and then experiences a fall equal to, or greater than the trail stop value you have set. If the security price does continue to rise, your trailing sell monitors for new highs and will not trigger until a fall of at least the trail stop value from the highest price since trailing started.

Example

For example, you have been watching the price of XYZ Ltd, which has been trading at $4.00 per unit and appears to be rising. You could create a Trailing Sell Trigger with a trail start price of $4.20 and trail stop value of $0.10.

In this example, the market price of XYZ Ltd reaches $4.20, and then experiences a fall of $0.05 to $4.15 before rising again. Because the trail stop was set at $0.10, the order did not fire. XYZ Ltd then reached a high of $5.20 before falling $0.10 to $5.10 which meant the market order fired at $5.10.

The key to successful investing is to decide on a strategy to reach your goals and then stick to it. Conditional Trading can help you keep your strategy locked in, even when your eye is off the market.

You select the share you want to watch, then set a trigger condition and order details. Our system monitors the market for you and when the share price rises or falls and your trigger conditions are met, the system submits a limit or market order on your behalf.

Example - Rising Sell

The Strategy

Declan bought 1,000 shares in ABC Ltd for $3.01 per share. His strategy was to sell when he could achieve a 20% capital gain.

The Process

Declan created a Rising Sell trigger with a trigger price of $3.65 and a limit price of $3.60. When the share price rose to $3.65, a sell order was automatically submitted for him, with a limit price of $3.60.

The Result

Declan's shares sold almost at the top of the market, at $3.63, giving him a gain of $0.62, or 21%, per share.

Example - Trailing Sell

The Strategy

Declan bought 1,000 shares in ABC Ltd for $3.01 per share. His strategy was to sell when he could achieve a 20% or more capital gain.

The Process

Declan created a Trailing Sell trigger with a trigger start price of $3.65 and a trail value of $0.10. When the share price rose to $3.65, trailing commenced.

The share price then experienced many fluctuations without falling by more than$0.10 until it reached $4.20 and then dropped to $4.09. At this point, an automated market sell order was submitted on his behalf with no limit price.

The result

Declan's shares sold almost at the top of the market at $4.07. The result was a gain of $1.06 per share - a capital gain of over 35%.

In this case study Declan was approximately 15% better off using a Trailing Sell instead of a Rising Sell however, the fired order was a market order and has a higher level of risk. Please consider a non-trailing conditional order if you would like the security of a limit price.

This strategy involves an investor combining a single equity contribution with a borrowed amount for investment. The total amount may be invested in managed funds, ASX listed securities or a combination of the two. This strategy puts your money to work immediately and provides full exposure to movements in share and unit prices. The flexibility of the facility also allows you to increase or decrease your investment exposure at any time.

This strategy combines the power of an investment loan with all the benefits of a disciplined savings plan. A regular gearing strategy automatically combines your monthly cash contributions with a borrowed amount for investment. Regular gearing is suitable to investors who don’t have a large amount to invest, wish to use a more conservative entry strategy or want to adopt a ‘dollar cost averaging’ strategy.

The flexibility that CALIA+ offers can allow you structure your facility to suit your individual needs. It permits up to 12 separate sub-accounts, allowing you to create and individually manage loans that have been established for different purposes. For example, you may wish to establish sub-accounts for your home loan, investment property loan, personal loans and your share/managed fund investment loan. Creating various loans based on their purpose will allow you to separate your tax-deductible loans from your non-deductible loans. This makes managing your tax affairs simple and it will also allow you to monitor the repayment and progress of each loan.

What makes CALIA+ truly unique is that each sub-account you establish within the Bundle will share the same common security being your home and/or investment properties. We can lend up to 80% of the value of a residential, rural or vacant property, however the amount we will lend you is subject to our normal credit assessment criteria. You then have the flexibility to nominate the credit limit for each sub-account you establish up to the amount you have been approved for (the Bundle Limit).

Typical Structure of CALIA+

For many Australians, owning a family home is only possible with the financial challenge of repaying a large home loan. With a focus on reducing their loan as quickly as possible, wealth creation plans are often left until later in life, leaving little time to benefit from the compounding nature of investing. But with the right advice they can continue to focus on repaying their home loan while also investing to build their wealth.

This strategy is referred to as ‘debt optimisation’ (also known as ‘debt recycling’) and works by reducing non-tax-deductible ‘bad’ debt (for example your home, car and personal loans) and replacing it with tax-deductible ‘good’ debt (investment loan) which is used to invest.

A Case Study:

Brad and Angela have a $400,000 home loan secured by the family home. They wish to retire in around 20 years and in order to pay off their home loan within this timeframe, they are currently paying $37,000 a year (approximately $27,000 in interest and $10,000 off their loan). Following a personal review of their finances they realise they have around $20,000 of surplus income each year.

They decide to visit their financial adviser to find the best use for their surplus income. During their appointment they discuss a number of strategies which include:

1. Adding their surplus income to their existing home loan repayments to repay it as quickly as possible. Once repaid they would start investing.
2. Invest their surplus income of $20,000 while continuing to make their current home repayments over 20 years.

Brad and Angela’s adviser suggests a third strategy called debt optimisation. Similar to the first strategy, he recommends that on top of their standard home loan repayments, they should use their surplus income to pay off as much of their home loan as possible. The strategy then requires Brad and Angela to re-borrow the equity in their home created by their total home loan repayments and invest it in managed funds.

Brad and Angela agree to a debt optimisation strategy. In the first year they managed to pay $57,000 ($37,000 current repayment + $20,000 surplus income) off their home loan — $27,000 in interest and $30,000 off their loan. Using a separate investment sub-account they redraw the principal amount that they have paid off their home loan and invest it into managed funds.

Debt Optimisation – An example^:

One year on

By adopting this strategy Brad and Angela’s total amount of debt has remained the same, however a portion of it ($30,000) is now tax-deductible ‘good debt’ — as this borrowing has been invested into managed funds, an income-producing asset. Brad and Angela are now entitled to claim the interest costs on this $30,000 borrowing as a tax deduction. As their investments also provide them with an additional source of income as well as franking credits, their strategy will become even more tax-effective^*. The additional source of income allows them to increase the rate at which they reduce their home loan (‘bad’ debt) which in turn allows them to increase the size of their investment loan (‘good’ debt) and investment portfolio over time.

Find out more

To find out more about how debt optimisation might be able to help you, please contact your financial adviser.

Regular savings plans provide an easy and disciplined way to invest in managed funds on a monthly basis.

CALIA+ is suitable to clients who wish to borrow against the equity in their property to make monthly investments into managed funds. All CALIA+ variable loans are established as transactional accounts with a BSB and account number. It can therefore provide a simple and automated approach to investing in managed funds by allowing the fund manager to directly debit your investment sub-account.

CALIA+ can be cost effective as it allows you to consolidate unsecured or personal debts that generally attract a higher interest rate than property secured loans. Consolidating all your debts within a CALIA+ facility is simple and could significantly reduce interest costs.

Example