Geared ETF vs Margin Loan vs NAB Equity Builder: Which Is Right for You?

There are three mainstream ways to invest in Australian shares with leverage in 2026. Each suits a different investor profile, offers a different risk structure, and comes with a different set of practical considerations.

This article is the decision guide. Here is everything you need to compare the three options and choose the right one for your situation.

The three options at a glance

Geared ETFs (G200, GHHF, GGBL, GNDQ from BetaShares): The fund borrows internally at wholesale institutional rates. You buy units like any ETF. No loan application, no margin calls, no personal debt. Effective leverage of approximately 1.43–1.67× your invested capital. Available from ~$500.

NAB Equity Builder: A principal and interest investment loan from NAB. You apply for a loan (minimum $20,000), purchase approved ETFs or managed funds, and make monthly P&I repayments. No margin calls. Interest potentially tax-deductible. Variable rate approximately 7–8% p.a.

Margin loan (CommSec, Bell Direct, Interactive Brokers): A personal loan secured against your share portfolio. You apply through a broker, borrow against approved securities, and own shares directly. Highest available LVR (up to 70%). Higher interest rates (9–10% p.a.). Margin calls exist — you can be forced to sell if your LVR is breached.

The master comparison table

Feature	Geared ETF	NAB Equity Builder	Margin Loan
Margin calls	None	None	Yes — forced selling if LVR breached
Loan application	No	Yes	Yes
Credit check	No	Yes	Yes
Maximum effective LVR	~40%	~75%	~70%
Interest rate	Wholesale (embedded)	Variable ~7–8% p.a.	~9–10% p.a. variable
Interest tax-deductible	No (management fee)	Yes — against investment income	Yes — against investment income
Minimum investment	~$500	$20,000	~$10,000
Direct share/ETF ownership	No (fund units)	Yes	Yes
Forced savings discipline	No	Yes (mandatory P&I)	No
Flexibility	Low (limited to fund exposure)	Medium	High (any approved security)
Complexity	Very low	Medium	High
Time to set up	Minutes (any ASX broker)	Days to weeks (loan assessment)	Days (broker account + application)
Best time horizon	10+ years	7–20 years	Active investors, any horizon

The interest rate reality

The effective cost of borrowing differs significantly across the three options, and the comparison is not as simple as looking at stated rates.

Geared ETFs: The fund borrows at wholesale institutional rates — typically 5–7% p.a. on the borrowed portion. This cost is embedded in the fund's net asset value (it slightly reduces returns) rather than charged as an explicit interest payment. The management fee (0.35–0.39%) covers both management and the administration of the gearing. The total cost of ownership is very low — but the embedded gearing cost means you cannot deduct it as interest.

NAB Equity Builder: Explicit interest rate of approximately 7–8% p.a. variable. This is the total rate on the full borrowed amount. It is charged monthly and potentially deductible against investment income. The rate is meaningfully lower than margin loan rates.

Margin loan: Rates of 9–10% p.a. variable (Bell Direct 9.90% effective May 2026). The highest of the three. However, this interest is fully deductible against investment income — for high-income investors with significant borrowing, the after-tax cost narrows the gap.

The tax treatment difference — important

This is the factor most often missed in comparisons.

Interest on the NAB Equity Builder and margin loans is tax-deductible against investment income in Australia. If you earn $8,000 in dividends and pay $7,000 in loan interest, your taxable investment income is $1,000. This reduces your annual tax bill directly.

For geared ETF investors, the management fee (which covers the embedded gearing cost) is treated as a fund expense rather than explicit interest. It reduces the fund's returns but does not appear on your tax return as a deductible interest payment. The tax treatment is less favourable for investors in high marginal rate brackets who would benefit most from deducting interest.

The practical implication: For investors in the 37–47% tax bracket with $50,000+ in borrowing, the tax deductibility of NAB Equity Builder or margin loan interest may partially or fully offset the higher explicit rate compared to a geared ETF. Do the after-tax calculation for your specific marginal rate before deciding.

Use our Income Tax Calculator to estimate your marginal tax rate and the value of deductible investment interest at that rate.

Margin calls: why this is the decisive risk factor for most investors

For investors with a long-term buy-and-hold strategy — the approach that has historically generated the best outcomes — the margin call is the single most important differentiating factor.

A margin call is triggered when your portfolio value falls enough that your LVR exceeds the agreed maximum. The lender demands you either:

• Contribute additional cash immediately, or
• Sell holdings to reduce the loan balance

In a severe market downturn — the scenario when you most need to hold and wait for recovery — a margin call forces you to do the opposite: sell at the worst possible time, lock in losses, and remove your ability to participate in the rebound.

This is exactly what happened to many leveraged share investors in the GFC. The margin call mechanism forced selling at market lows, converting temporary paper losses into permanent realised ones.

Geared ETFs and the NAB Equity Builder both eliminate this risk. If you can make your NAB Equity Builder repayments and you're holding a geared ETF, a market crash of 30–50% reduces your portfolio value significantly but does not force you to sell. You hold. You recover.

For a long-term investor, no margin calls is worth more than the higher LVR a margin loan offers.

Who each option suits

Choose a geared ETF if:

• You want to start immediately with any amount from $500
• You want zero paperwork and no banking relationship
• Simplicity and automation matter more than maximum LVR
• You are happy with 30–40% effective leverage and don't need more
• You don't require the tax deductibility of explicit interest
• You want to set it up once and add to it regularly with minimal admin

Best starting fund: GHHF (globally diversified) for most investors. G200 (ASX-focused) for those who want concentrated Australian exposure.

Choose the NAB Equity Builder if:

• You have $20,000+ ready to deploy
• You want the familiarity and discipline of a P&I loan structure
• You want direct ownership of ETFs (important for CGT and franking credit strategies)
• The tax deductibility of interest matters to your strategy
• You benefit from the forced savings discipline of mandatory monthly repayments
• You want higher potential leverage than a geared ETF (up to ~75% LVR)

Best investments via Equity Builder: DHHF or VDHG for diversified global exposure. VAS + VGS combination for Australian + international.

Choose a margin loan if:

• You are an experienced investor who understands margin call risk thoroughly
• You want to select individual securities as well as ETFs
• You need maximum LVR (up to 70%) to achieve your target leverage
• You have the financial capacity to contribute additional capital quickly if a margin call occurs
• You actively monitor your portfolio and can respond to LVR breaches

Not recommended for: Investors who cannot monitor their portfolio regularly, first-time leveraged investors, or anyone who might panic-sell in a downturn.

The flowchart decision

Do you have $20,000+ to invest?
├── No → Geared ETF (only viable option)
└── Yes → Do you want no paperwork and maximum simplicity?
           ├── Yes → Geared ETF
           └── No → Do you want P&I structure with mortgage-like discipline?
                      ├── Yes → NAB Equity Builder
                      └── No (want max LVR + flexibility + can handle margin calls) → Margin Loan

Can you use more than one?

Yes. Many sophisticated investors use multiple approaches:

• Geared ETF for the core long-term holding (simple, low-maintenance)
• NAB Equity Builder for a specific allocation (e.g. Australian shares, where they want direct ownership for franking credits)
• No margin loan at all (margin call risk removed from portfolio)

The most important decision is not which single product to use. It is committing to a long-term approach and not changing it based on short-term market movements.

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Frequently asked questions

Is the NAB Equity Builder better than a geared ETF?

Neither is universally better. Geared ETFs are simpler, require no application, start from $500, and suit investors who want a low-maintenance approach. NAB Equity Builder provides P&I discipline, direct share ownership, higher potential LVR, and tax-deductible interest — but requires $20,000 minimum and a formal loan application. The right choice depends on your capital, goals, and whether the tax deductibility of interest matters to your specific tax situation.

What is the effective after-tax cost of each option?

For a 37% bracket investor borrowing $100,000: Geared ETF embedded cost ~$2,100 (5.25% × $40k borrowed, non-deductible); NAB Equity Builder explicit cost ~$7,500 before tax ($7.5k interest), ~$4,725 after 37% deduction; Margin loan explicit cost ~$10,000 before tax, ~$6,300 after 37% deduction. These are indicative — actual costs depend on current rates, your specific LVR, and your marginal tax rate.

What happens if markets crash and I hold a geared ETF or NAB Equity Builder?

For geared ETF holders: the fund automatically de-gears (sells a small amount to bring LVR back within range). Your portfolio falls in value but you are not forced to sell. You hold and recover. For NAB Equity Builder holders: as long as you continue making monthly P&I repayments, NAB cannot force a sale due to market movements. Your portfolio falls in value but your equity recovers as markets recover and you continue repaying principal.

Are there other leveraged investing options in Australia besides these three?

Options not covered in detail here include: leveraged ETFs from providers other than BetaShares Wealth Builder (some of which are synthetic and unsuitable for long-term holding), leverage within SMSF (complex, specialist advice required), warrants and options (sophisticated instruments for experienced traders), and direct property investment (covered extensively elsewhere on this site). For mainstream investors seeking long-term leveraged share exposure, the three options covered in this article are the most practical.

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This article is for general information only and does not constitute financial, tax or legal advice. Individual circumstances vary. Consult a registered tax agent or licensed financial adviser before making decisions based on this information.