How Margin Lending can amplify returns

Markets do not always wait for investors to have fresh cash ready.

This is especially true in fast-moving themes such as artificial intelligence and semiconductors, where strong earnings, rising capital expenditure, supply shortages or positive momentum can keep pushing prices higher.

Investors may already have a portfolio they believe in, but still feel underinvested when opportunities appear. That is where Margin Lending can become useful — when used carefully.

What is Margin Lending?

Margin Lending allows eligible investors to borrow against their existing portfolio and use that additional buying power to invest. In simple terms, your current holdings act as collateral, giving you access to funds without having to sell existing investments or wait for new cash to arrive.

The appeal is straightforward: if the investments purchased with borrowed funds rise by more than the borrowing cost, returns can be enhanced. But the risk is just as important: if markets fall, losses are also amplified.

Why investors may consider Margin Lending

Margin Lending can be useful for investors who want more flexibility in how they manage opportunities. Instead of selling existing holdings to fund a new idea, investors may be able to use their portfolio as collateral and deploy additional capital.

This can be particularly relevant in markets where momentum is strong. For example, the AI and semiconductor theme has been supported by several structural forces: rising demand for computing power, continued investment in data centres, growing cloud and AI infrastructure spending, and demand for chips, memory, servers and power equipment across the value chain.

For investors who already have long-term conviction in these themes, Margin Lending can provide a way to increase exposure without disrupting the rest of their portfolio.

It can also help investors act faster. Rather than waiting for fresh cash, selling existing holdings or disturbing a long-term portfolio, Margin Lending can provide additional buying power when opportunities appear.

Key decisions before using Margin Lending

Margin Lending is not just about borrowing more. It is about deciding how much to borrow, what to invest in, and which currency to use.

1. What currency should the loan be in?

For investors looking to add exposure to AI and semiconductor opportunities, the funding currency matters. A lower borrowing rate can improve the return hurdle, but currency risk should not be ignored.

Importantly, the borrowing currency generally needs to be available in that currency sub-account, or matched to the currency of the instrument being bought. For example, if an investor wants to buy USD-listed AI or semiconductor stocks, the investor may need to consider whether the funding, sub-account currency and investment currency are aligned.

For Singapore-based investors, SGD funding can be cleaner because the borrowing currency is aligned with their home currency. However, CHF funding can look particularly attractive for investors buying USD-listed AI and semiconductor stocks, because CHF borrowing costs are lower than both SGD and USD loan rates. Still, investors should consider FX conversion and currency risks, as exchange-rate moves can change the final return and may offset some or all of the interest-rate advantage.

2. How much should be borrowed?

The right borrowing amount depends on the size and quality of the collateral portfolio, the investor’s risk appetite, and how much volatility they can tolerate. A larger, diversified portfolio may support more borrowing capacity, while a concentrated or volatile portfolio may require a much larger buffer. In practice, a more disciplined approach is often to borrow less than the maximum limit, leaving room in case markets fall, collateral values decline or margin requirements change.

In the example below, the borrowed amount is limited to the same level as the investor’s initial capital. This creates 2x buying power — SGD 100,000 of investor capital plus SGD 100,000 of Margin Lending gives SGD 200,000 of total market exposure. This keeps the illustration simple and more conservative than using a much larger loan.

3. What could investors buy?

Margin Lending works best when the borrowing has a clear investment purpose. For investors looking to get on the AI train, the focus does not need to be only one stock or one part of the value chain.

Investors may explore opportunities across the broader AI ecosystem, including:

• semiconductor leaders and chip equipment companies;
• memory, HBM and data centre infrastructure names;
• cloud, software and cybersecurity beneficiaries;
• power, cooling and infrastructure companies supporting AI demand;
• ETFs that provide diversified exposure to AI, semiconductors or broader technology themes.

A practical starting point is to use Saxo’s shortlists page and browse through themes in focus, including AI value chain, memory, gold & silver stocks and ETFs or even Singapore and other regional plays.

A simple example: how financing can amplify returns

The clearest way to understand Margin Lending is to compare the same investment idea with and without financing.

Assume an investor wants exposure to AI and semiconductor stocks, and the investment rises by 8% over the period. The investor either uses only SGD 100,000 of their own capital, or uses SGD 100,000 of their own capital plus SGD 100,000 of Margin Lending.

For illustration, the CHF funding rate is 2.00% p.a. and the SGD funding rate is 2.91% p.a. The example assumes no FX movement, no transaction costs and no change in collateral requirements.

This is the power of financing in a rising market. The investment return is earned on the larger market exposure, while the investor’s initial capital remains SGD 100,000.

The CHF-funded example shows the highest return because the borrowing cost is lower. In this illustration, the lower CHF rate adds about SGD 910 to the net return compared with SGD funding.

But this is before FX impact. If the investor borrows in CHF but invests in SGD or USD assets, currency moves can change the final result. SGD funding may produce a lower illustrated return, but it avoids adding a separate CHF currency exposure for Singapore-based investors.

The same maths also works in reverse. If the AI or semiconductor investment falls by 8%, the financed portfolio would face a larger loss, and interest would still be payable. Margin Lending can improve returns when the investment performs well, but it also increases downside risk when markets move against the position.

A practical way to think about it

Margin Lending may be best used as a measured extension of an existing strategy, not as a reason to take oversized bets.

For example, an investor who already has a diversified portfolio may use a limited amount of Margin Lending to add exposure to a high-conviction theme. The idea is not to replace discipline with leverage, but to use additional buying power selectively.

This could include:

• adding to a long-term growth theme such as AI or semiconductors;
• increasing exposure during a market pullback;
• funding a tactical opportunity without selling existing holdings;
• diversifying into a new area while keeping the core portfolio intact.

The important point is that the borrowed amount should remain manageable even if the market moves against the investor.

How to use Margin Lending more responsibly

A more disciplined approach could include:

• borrowing less than the maximum available amount;
• keeping a cash buffer for volatility;
• avoiding excessive concentration in one stock or sector;
• stress-testing the portfolio for a 10%, 20% or larger market decline;
• monitoring borrowing costs and loan-to-value levels;
• having a clear exit or reduction plan if the trade moves against expectations.
• Margin Lending should support an investment plan, not replace one.

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