Since the beginning of MDJ, I have talked about the Smith Manoeuvre. For those of you just joining us, The Smith Manoeuvre is a wealth strategy that utilizes a home equity loan to invest in income producing assets. The result is a tax deductible loan and portfolio that increases as you pay down your mortgage.
There are quite a few Smith Manoeuvre strategies out there. The plain jane SM strategy involves investing the small credit line increases into tax efficient mutual funds. For me, I’m doing a slight twist where I’m going to use the credit line increases to fund the investment loan, thus giving me a larger lump sum to start with. Along with that, I’m going to invest in purely strong dividend paying stocks which meets the CRA “income” requirement and giving me tax efficient income to boot.
The dividends will then be used to further pay down the mortgage. If this strategy works out, according to the Smith Manoeuvre Spreadsheet, I should have my $150k non-deductible mortgage paid off in under 10 years. At that time, hopefully my dividends will have grown to the point where they can service the underlying investment loan in addition to buying me steaks when I’m feeling carnivorous.
Onto the portfolio. With the markets in it’s current state, who knows where the financials are going. I’m a little bit on the nervous side, so I’ve been simply dabbling in stocks that appear cheap to me. As you can see from the portfolio below, it’s extremely overweight in financials. I plan to diversify into energies and utilities as they (hopefully) come down in price.
|Stock||Symbol||Shares||Avg Buy Price||Total||Div/Share||Avg Yield|
You might be thinking that I’m crazy for buying such small lots, but since I have a bunch of free trades with Questrade to use up, why not?
Hopefully, these updates are interesting to you. If there is something that you would like added to the table above, let me know and I’ll see what I can do.
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