Our Director and Private Wealth Adviser, Joshua Barker, appeared on The Open on AusBiz on 28/11/2025 to discuss current market conditions—and the instrument he believes is best positioned to take advantage of them.
Why Consider GEAR.AX in the Current Market?
With the ASX200 pulling back in recent weeks—driven largely by stretched Technology valuations—many investors are looking for ways to buy quality at a discount and position themselves for a potential rebound. One instrument that stands out in this environment is GEAR.AX, a leveraged ETF designed to amplify returns when the market moves higher.
If you believe the ASX200 will recover over the coming months, GEAR is built to benefit from that upswing.
What Makes GEAR Different From Other Leveraged ETFs?
Most leveraged ETFs use derivatives – typically futures contracts – to synthetically gain exposure to the market.
GEAR does not.
Instead, it takes a more direct and transparent approach:
- GEAR physically buys the ASX Top 200 companies,
- Then uses a loan facility to purchase additional exposure (creating the leverage).
This structure allows GEAR to operate differently from typical derivatives-based leveraged funds—and it matters for income investors.
How the Income Component Works
Because GEAR holds real shares, it collects:
- Dividends from the underlying companies; and
- Franking credits attached to those dividends.
Here’s the unique part:
GEAR uses the dividends and franking credits to pay down its loan.
Whatever remains after interest and costs is paid out to investors.
Since a fund cannot retain franking credits, they are passed through to unitholders—resulting in periods of very high effective franked income.
With interest rates now easing, the net cash dividend from GEAR is likely to become increasingly attractive again.
Why the Timing May Be Attractive Right Now
A few factors are aligning:
1. Market Pullback + Early Signs of a Bounce
The ASX200 has recently come off its highs and is showing signs of stabilising. Leveraged exposure can be beneficial when entering at depressed levels.
2. Seasonal Strength: The Christmas Rally
Historically, markets often finish the year strongly.
Because GEAR tracks the entire index, any broad-based rally tends to flow directly through.
3. Upcoming Dividend Payment
GEAR is scheduled to pay its next distribution on 1 January, covering the past six months.
For income-focused investors, this timing can be attractive—especially given the franking component.
Bottom Line
GEAR.AX is a powerful tool for investors who:
- Expect the ASX200 to move higher from current levels,
- Want leveraged exposure without derivatives,
- Value franked income, and
- Are comfortable with the higher volatility associated with leverage.
As always, leveraged ETFs amplify both gains and losses—so they should be used thoughtfully within the context of a diversified portfolio.
If you’d like personalised guidance on whether GEAR fits into your investment strategy, feel free to reach out to the Barker Wealth team.
Disclaimer:
This commentary is intended for general information only and does not constitute personal financial advice. You should consider your own objectives, financial situation, and needs before making any investment decisions.