I did forget so 10,000 BRN equals $880,000. Wow.
My opinion only DYOR
FF
AKIDA BALLISTA
I am sure most here understand gearing and how it works but mostly it is a wealth creation strategy spoken about in the context of real estate investing.
Gearing however is simply the process of allowing a large sum in a non taxed environment to take advantage of growth through general inflationary pressures.
So take the notional $880,000 above until you sell there is no tax to pay. If you sold immediately the $880,000 would become somewhere in the region of $550,000 after tax if you held for less than 12 months from date of purchase.
You NOW have $550,000 to invest.
If you had not sold you would have $880,000 to invest.
Effectively the Australian Tax Office is making you an interest free loan of $330,000 to invest and keep a significant component of the returns WHEN YOU DO SELL.
As your investment grows this interest free loan grows with it.
This is gearing in its purest form.
“According to Canstar the following has occurred over the last 30 years:
“Vanguard's chart which we can view here, shows that Australian shares have performed well as an asset class, with a return of
9.7% per annum, second only to the return of US shares of 10.8% p.a. Listed property has also done well returning 8.6% over 30 years and only 1.1% behind Australian shares.11 May 2022
https://www.canstar.com.au › austral...
So why am I posting this well because Brainchip is a growth stock or so close to being such that it is not necessarily a short term investment.
The beauty of growth stocks is they grow as their business matures.
They can and do produce what I have described as generational wealth.
I have mentioned the rule of 72. It is a simple sum used to work out how quickly you will double your money at a given rate of return. So taking 72 and dividing it by 9.7% your $880,000 will be $1,760,000 in 7.44 years.
Taking the $550,000 it will become $1,100,000 in 7.44 years.
You are now $660,000 behind thanks to not taking advantage of the ATO’s kind offer to make you a tax free loan (forever or until you sell and realise your capital gain).
Growth companies eventually pay dividends as well and those dividends are paid on the shares you get to own interest free as a result of the generous ATO loan.
The above is just one reason why it is critical to have a plan.
If MF is saying buy, something we already know, then the tipping point in our journey is likely nearer than we expect.
Don’t get caught with your plans down.
My opinion only DYOR
FF
AKIDA BALLISTA