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 detail, check out the modified smith manoeuvre strategy. It almost sounds like a giant mistake waiting to happen with the current market conditions.
I will be honest, the leveraged portfolio hasn’t been pretty the past few months and extremely volatile. I will admit that leveraged investing in this market volatility can make an investor queasy. In spite of the occasional dry heave, I think that sell offs are an opportunity for long term investors.
To put my money where my mouth is, instead of selling and going to cash during the sell off, I have been buying more dividend stocks. To be more specific, I added to my position in Husky Energy and Fortis in addition to initiating small positions in Petro Canada and Teck Cominco (thanks DAvid).
Here is my SM portfolio thus far:
|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 Cost Base (including commissions): $30,496.59
Portfolio Holdings Value (excluding cash) on Oct 28, 2008 : $25,451.82
Total Dividends / Year: $1,102.75
Portfolio Dividend Yield: 3.62%
Even though the portfolio value is currently less than my borrowed amount, I am still fairly happy with the progress of the Smith Manoeuvre because of the fairly high yields of the strong dividend payers. As you may have noticed, the portfolio is starting to get a bit diversified away from the financials where they represent about 62% of my entire portfolio now.
In hindsight, if I waited a bit longer before adding to my positions, I would have a lower adjusted cost base. I guess there may be something to the saying “never try to catch a falling knife.”