For those of you just joining us, this is my portfolio that is leveraged with money borrowed from my home equity line of credit (HELOC). As the money borrowed is used to invest, the interest charged is tax deductible. For more details, check out my modified smith manoeuvre strategy.
It’s been a couple of months since the last update and there isn’t much good news to report back. The portfolio has been driven down lower as the markets are still making new lows. Even though there are a good few equities that may be considered “cheap”, I’m nervous about deploying new capital in this market as the bears have clear control.
Despite this though, I did dabble a bit. So what did I buy? Only one purchase, 30 shares of Scotia Bank (BNS). Seems though that lately whenever I buy something, it goes down further!
If you compare to last month, you may notice that the portfolio dividend yield has been reduced a bit. The reason is that Husky Energy has decided to reduce their dividend during this period of reduced oil prices. There is some speculation that the banks may potentially reduce their dividend as well which would put a damper on my dividend goals. I’m going to keep my fingers crossed that the banks pull through this financial mess without touching their dividend payout.
Here is my SM portfolio as of Feb 2009:
|Stock||Symbol||Shares||Avg Buy Price||Total||Div/Share||Yield|
|FTSE RAFI US 1500 Small-Mid ETF||PRFZ.US||20||$51.50||$1,029.99||$0.42||0.82%|
|AGF Management Limited||AGF.B.T||50||$22.71||$1,135.49||$1.00||4.40%|
|Bank of Montreal||BMO.T||25||$44.17||$1,104.24||$2.80||6.34%|
Total Portfolio Book Value: $50,000 (total invested from HELOC)
Portfolio Net Value: $37,345.54
Total Portfolio Cost Base of Equities (including commissions): $34,855.60
Portfolio Market Value of Equities (as of Feb 24, 2009): $20,672.10
Total Dividends / Year: $1,361.30
Portfolio Dividend Yield: 3.91%
It’s a little demotivating to see the net value of my portfolio well below the book/purchase value. However, if we were to focus on the positive, it would be that the dividend yield is still relatively high relative to my after tax investment loan servicing costs. In addition, I still have substantial credit available on my HELOC which is potential investment cash.
There have been a lot of readers who have mentioned that they are interested in a leveraged portfolio. Over the long term it may be lucrative. However, over the short term, equities are volatile and can put the portfolio deep in the red. My portfolio is a prime example of what can happen. If you can’t stomach losing 20-30% in the portfolio in any given year, then your risk tolerance isn’t suited for leveraged investing.If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).