Margin calls can turn a bullish day on the ASX into a financial headache, fast. As more Australian investors explore gearing strategies in 2025, knowing how margin calls work—and how to sidestep them—has never been more important.
How Margin Calls Work in Australia
When you borrow money from your broker to invest (a strategy known as trading on margin), you’re leveraging your buying power. But with greater potential gains comes greater risk. If your investments fall in value and your equity drops below the lender’s required level (the maintenance margin), you’ll receive a margin call: an urgent request to top up your account or sell assets to cover the shortfall.
- Example: You invest $100,000, using $50,000 of your own funds and $50,000 borrowed. If your portfolio drops to $80,000, your equity falls to $30,000. If your broker’s maintenance margin is 35%, you now owe a margin call to restore your equity to the required level.
- Action required: Add cash, sell shares, or risk forced liquidation by your broker.
Margin Calls in 2025: What’s Changed?
This year, several factors have shifted the landscape for Australian margin investors:
- ASX tightening risk controls: Following recent volatility, the ASX has mandated stricter margin lending disclosures and higher minimum equity ratios for certain high-volatility stocks.
- RBA interest rate cycles: With the RBA holding rates steady at 4.35% in early 2025, margin loan interest remains significantly higher than pre-2023 levels, increasing the cost—and risk—of gearing.
- Digital margin monitoring: Most brokers now offer real-time margin status alerts via app or SMS, giving investors faster warning of impending calls, but also less time to react during sudden market moves.
These changes mean margin calls may come more quickly, especially for portfolios concentrated in sectors like tech or resources, which have seen heightened price swings in 2025.
How to Protect Yourself from Margin Calls
While margin lending can amplify gains, it’s not for the faint-hearted. Here’s how savvy Aussies are protecting themselves:
- Keep a buffer: Maintain equity well above your broker’s minimum. Many experts suggest a 10–20% ‘safety margin’ to avoid sudden calls.
- Diversify: Spread investments across sectors and asset classes. Diversification can smooth out volatility and reduce the chance of a portfolio-wide slump.
- Monitor daily: With market swings in 2025, check your margin status frequently—don’t wait for the broker’s call.
- Have cash ready: Set aside a cash reserve that can be quickly deployed if your equity drops.
- Understand your broker’s policy: Each lender has different rules for margin calls, forced sales, and notification periods. Know these before you gear up.
Consider the story of Emily, a Sydney-based investor, who avoided a forced sell-off during the March 2025 tech correction by keeping a $10,000 cash buffer in her margin account. When her portfolio dipped, she was able to quickly top up and ride out the volatility—while others saw their positions sold at a loss.
What to Do If You Get a Margin Call
If you receive a margin call, time is of the essence. Here’s a step-by-step approach:
- Act fast: Contact your broker and understand the exact shortfall and deadline.
- Add funds or collateral: Transfer cash or eligible securities to restore your equity ratio.
- Sell assets strategically: If you must sell, choose lower-performing or non-core holdings first to minimise long-term impact.
- Review your strategy: Use the experience as a prompt to reassess your risk tolerance and gearing level.
Remember: If you ignore a margin call, your broker can sell down your assets—often at unfavourable prices—to recover their loan.
Conclusion
Margin calls are a fact of life for geared investors, but they don’t have to spell disaster. By staying informed about the 2025 regulatory changes, keeping a prudent buffer, and monitoring your account closely, you can harness the power of margin while protecting your downside. Margin lending isn’t for everyone, but for those who use it wisely, it can be a valuable tool for growing wealth—even in a choppy market.
