Many Australians exploring debt recycling focus on building investments while gradually reducing their mortgage. Once an investment portfolio begins to grow, another concept can sometimes enhance the long-term strategy: internal gearing.
When used carefully within a disciplined investment framework, internally geared investments can allow investors to maintain strong growth exposure while still holding some cash or defensive assets in their portfolio.
What Is Internal Gearing?
Internal gearing occurs when an investment fund borrows money inside the fund structure to increase exposure to the underlying assets.
- Borrowing occurs within the investment fund
- The investor does not personally manage the loan
- The gearing level is managed by professional investment managers
This means the fund may have greater exposure to growth assets than the investor’s capital alone would normally provide.
Example of Internal Gearing
| Investor Capital | Fund Gearing | Market Exposure |
| $100,000 | 30% internal gearing | $130,000 market exposure |
Why Internal Gearing Can Complement Debt Recycling
Debt recycling already involves borrowing to invest. Internal gearing can sometimes enhance a portfolio by maintaining strong market exposure while still allowing investors to keep some liquidity.
| Portfolio Component | Example Allocation |
| Cash | 10% |
| Growth Investments | 90% |
| Internally Geared Exposure | ~115–120% market exposure |
Why Holding Cash Can Be Valuable
- Purchase assets during market downturns
- Rebalance portfolios when valuations become attractive
- Reduce the need to sell investments during volatile periods
When internal gearing is incorporated carefully, investors may maintain strong growth exposure while still retaining flexibility.
The Importance of Discipline
- Investment time horizon
- Investor risk tolerance
- Portfolio diversification
- Overall debt levels
At EPG Wealth we follow clear internal investment mandates when evaluating strategies such as internal gearing. These help guide decisions during periods of market volatility.
How EPG Wealth Can Help
- Reviewing your balance sheet and mortgage structure
- Assessing cashflow sustainability
- Designing disciplined investment portfolios
- Providing ongoing advice through market cycles
Speak With EPG Wealth
If you would like to explore whether strategies such as debt recycling or internally geared investments may be appropriate for your circumstances, please click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.
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General Advice Disclaimer: This information is general in nature and does not take into account your personal objectives, financial situation or needs.