Yes this is the way I have set it up also. My accountant wouldn't have it any other way.
“Fraught with Danger” were his words.
This structure also allows you to set up a home equity loan with you bank if you wish. This will allow you to draw down on your equity to invest with.
Good concept, cheaper interest and better arrangement than Margin Lending.
When things get tough the dividends will always meet the loan interest payable. This arrangement may also gives one tax benefits.
It allows you to borrow at say 5.5% If you buy the best value & reliable Blue Chip Stocks returning a similar % rate with 100% franking credits the capital growth and the return in franking credits are for nicks.
Do this for 5 to 7 years on a bullish trending market with trailing stop loses you will find it hard to go wrong.
I found that after a few years when I really got to know the market a bit and its trends so I ventured away from 100% blue chip stocks.
I then set up a new strategy of 60% blue chip, 30% good strong midcaps (that would one day turn into reliable blue chip companies) and 10% speculative.
I have been using this method for many years now, may be a bit boring for some but it works OK for me.
