Hey guys, for those of you just joining us, below 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. I write an update every couple months or so to show new positions added along with any market gains/losses. For more details, check out my modified smith manoeuvre strategy.

I’m very surprised that the rally has lasted this long into the summer as it hasn’t let up since the market lows in March.  I’m still patiently waiting for a correction so that I can buy more equities but I’m not sure if stocks will ever get as cheap as they did a few months ago.  In hindsight, perhaps I should have bought more during that time, but hindsight is always 20/20.

Transactions wise, my portfolio has seen very little action due to the appreciating market.  Right now, I don’t see any attractive valuations besides perhaps a few of the utilities.  I did manage to sell of my last bit of Teck Comminco, but looking at the continuing rally, I should have held on for a bit longer.  To look at the positive though, I’m lucky to have held onto half my position during the rally as I was tempted to sell all my shares @ $4 when they announced their dividend cut.

Speaking of dividend cuts, Manulife has announced that they have cut their dividend in half due to capitalization issues with their variable annuities products.  This is actually very disappointing news as Manulife has been a strong dividend stock for some time now.  I wonder if any other of the insurers are considering a cut in their distribution?  In the mean time, I will be holding onto my shares as I still believe that MFC is a strong long term company.

The Portfolio as of August 2009:

Stock Symbol Shares Avg Buy Price Total Div/Share Yield
Royal Bank RY.T 75 $47.62 $3,571.25 $2 4.20%
CIBC CM.T 45 $67.14 $3,021.25 $3.48 5.18%
Power Financial PWF.T 105 $35.14 $3,689.65 $1.40 3.98%
Scotia Bank BNS.T 105 $41.91 $4,400.52 $1.96 4.68%
Manulife Financial MFC.T 125 $33.12 $4,139.48 $0.52 1.57%
Fortis Properties FTS.T 150 $25.63 $3,843.98 $1.04 4.06%
TransCanada Corp TRP.T 100 $33.50 $3,349.74 $1.52 4.52%
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%
Husky Energy HSE.T 85 $35.90 $3,051.28 $1.20 3.34%
Teck Cominco TCK.B.T 100 $15.35 $1,258.99 $0.00 0.00%
TD Bank TD.T 50 $48.24 $2,412.23 $2.44 5.06%
Enbridge ENB.T 40 $37.36 $1494.39 $1.48 3.96%
TransAlta TA.T 50 $21.47 $1073.49 $1.16 5.40%
First Capital Realty FCR.T 100 $15.75 $1,574.99 $1.28 8.13%
Canadian Utilities CU.T 50 $36.40 $1,819.99 $1.41 3.87%

More Stats

  • Total Cost Base of Equities (inc. fees): $40,711.96
  • Market Value of Equities (Aug 7, 2009): $40,092.50
  • Total Dividends / Year: $1,700.50
  • Portfolio Dividend Yield: 4.18%

Sector Allocation (based on market value)

  • Financials:    57.71%
  • Utilities:    16.95%
  • Energy:    18.68%
  • Resources:    0.00%
  • Real Estate:    4.41%
  • Other:     2.25%

Leveraged Investing Disclaimer: 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.

Notify of

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Inline Feedbacks
View all comments

Your SM portfolio seems to heavily weighted in Financial Services. Are you concerned with diversification in this portfolio or are you looking for volatility from overweighting in one sector?


If you dont believe that the market will correct, then buy. The current numbers coming out of the U.S and Canada are spun, eventually when they cant be spun any longer.. the market will tank. Canadian unemployment numbers for July were 75k..then they spun it by saying that PT jobs and self employment were created and so that reduced it to 45k..well, PT jobs can be 4hours a week and self employment can be someone applying for a biz license.. don’t believe the hype.

I also agree that you have too much in financials, we have a problem with CC and loan delinquencies in this country, more then the banks or media want to admit..that will also come to light in the next year..I would better diversify.

I note your disclaimer regarding the risk of trading a leveraged portfolio. Here’s a question: as a frugal trader, why are you interested in leveraging risk and not in adopting an investment strategy that reduces risk?

Frugality and increased risk (yes, with increased reward potential) does not sound as if they are compatible ideas.

I appreciate that you are not a passive investor, despite the fact that passive investing appears to be the choice of most personal finance bloggers. Passive investing is fine for some people, but not for others.

But, aren’t you interested in protecting your assets from events such as the 2008 market meltdown? I’m suggesting that you consider the collar strategy as a way to prevent large losses at the cost of limiting profits. So I suppose my question is: How much is it worth to you to guarantee that you will not have those occasional 20-30% losses? Is is worth giving up the chance to have a really big year when the markets surge?

Your yield on Manulife reads 3.14%, but I think you have not recalculated this after the dividend cut. $0.52 dividend on $33.12 price is a yield of 1.57%.

Thanks for sharing your portfolio stats! I like most of these companies but I’m not sure about the ETF and AGF Management…. as per being overweight financials, I’d just add a few other companies in there, maybe some good consumer stocks with lots of growth potential (or at least div. growth potential): SC and THI. I wouldn’t sell the Canadian financials.

I also agree with mojo above that many economic numbers are needlessly spun. Employment being one of the worst. GDP calculation is bad, too. And CPI…

This specific portfolio is difficult to protect because you cannot use options when trading fewer than 100 shares per stock.

But you can use collars on a few of these holdings – if they have listed options. As a Yank, I am unfamiliar with these companies, but let’s say you wanted to collar Trans Canada.(TRP)

Assuming you just bought the shares at 33.50 (as an example), you would buy one Sep 30 put and sell one Sep 35 call. [You can choose different strike prices, but this comment is not the place for more details].

Good news: If the stock is below 30 when expiration arrives in Sep, you can sell @30 and limit losses (or keep the stock and sell the put; that’s good if you want to re-invest in this company)

Bad news: Your profits are limited. If the stock is above 35 when expiration arrives in Sep, the call owner will take your stock and pay $35 per share.

More good news: You may be able to collect more from the call than you pay for the put, giving you free insurance. ‘Free’ in that the cost is zero, but the true cost is those limited profits.

That’s just a quick example.

When you hold a diversified portfolio – and especially when it includes odd lots – only portions of the portfolio can be protected with collars. But, if you believe your portfolio is similar to any specific index, you can trade index options to hedge. That’s a bit sophisticated and I’ve never tried it for managing risk for a collection of stocks.

The reason the market has rallied is because the Feds have been monetizing the debt. They’re propping up the stock market with ever more printed money.


An interesting portfolio. Seems like you’re just mirroring the top end of the index. Why not save a whole lot of commissions and just buy XDV? Even add some XTR and juice the yield (for a while anyway)? Wider diversification, less commissions, better average yield, and you can even play with options on the ETF for hedging or extra cash if that’s your fancy…

Nice to see your SM Portfolio near book value. Every time I look at my accounts I’m amazed, and like you I’m kicking myself for not making more moves at the end of Feb/beginning of Mar.

Its a funny point I’d like to make, but I’m guessing most of your portfolios’ exposure to financials is done through this particular account.

Do you feel you are carrying a bit more risk since they are all CAD companies, with the vast majority of their earnings coming from within Canada? and you probably have little exposure to foreign financials. (Again, a weird point, since CAD banks are widely held as among the best in the world).

Looks like you should allocate some of your investments from financial services to resources. I agree with mojo30 that numbers are spun and I bet the numbers in the financial sector is artificial.

Hey FT,

Although you’re weighted in financials, I think you need to be, because if the Canadian banks aren’t making any money, I’ll bet my house that few other businesses are!

As you are likely aware from my previous correspondence with you, I’m just starting on that path: strong, mostly-Canadian-dividend payers.

It will take me a few years to get $10,000 in my account, to see my dividends start to make a difference, but there is no doubt that your strategy 20 years from now (ala Derek Foster) will pay off.

Keep it up.


My SM portfolio is similar to yours but even more weighted to financials. And, just like you, I have other investment portfolios that more evenly distribute the investments. Perhaps you need to state that during every update because no matter how many times it has been said, you still get criticized for being overweight financials!

If you adopt the dividend paying strategy (as we both have) there are fewer good companies that aren’t financials which:

1. Pay a decent dividend (e.g. > 3%)
2. Have a historically safe payout ratio (e.g 5% annually

I try not to beat myself up with my portfolio that there were so many better opportunities to get into the market but I couldn’t time it properly. I’m also waiting (and waiting, and waiting) for a retracement for purchasing further. If only I could have been so patient months ago!

The reason stocks will get as cheap again is because:

1) So many people now believe they never will.

2) For the US to continue with its debt issueance, it needs buyers. Now that 97% are bearish on US dollar, look for dollar to make a strong comeback keeping US debt going – all at peril of the stock market and commodities.

3) This argument can be made for just about all global stock markets but I’ll stick with S&P500. It is currently at unheard of P/E ratio: 143. That is not a misprint and is based on as reported earnings. This is the very definition of a bubble. A P/E ratio over 25 is high!

4) At the March lows, P/E ratios were still in low double digits. There has not been an end of any recession in history where P/E ratios of major indices did not reach single digits.

5) Private and consumer spending is down and does not look to be recovering in the near term. Government spending is up – way up – but how long can this go on? This is what has fueled the rally around the world.

Stay patient. In the near term (1 year or so) deflation is the risk. After that get ready for inflation.

I would like to think all of my ideas are my own but they are not. I spend a lot of time looking at mainstream media (marketwatch.com, bloomberg.com, globeandmail.com, BNN, CNBC). This is where I get predominantly bullish views. I also spend a lot of my time looking at blogs (such as milliondollarjourney.com) where there is a much more detailed and, in my opinion, accurate view of the financial world (ritholtz.com/blog, market-ticker.denniger.net, financialsense.com, globaleconomicanalysis.blogspot.com, zerohedge.com, marketoracle.co.uk).

Money is not made when you sell, it is made when you buy. Stay patient.

And anyone interested in this thread should also refer to Mike’s comment: #8. TARP was suppose to free up lending during a credit crunch in the US for consumers and small businessses. Instead, the money has gone in to inflating the stock market and speculate on commodities. Goldman Sachs made over $100M on something like 41 days in Q2 and finished the quarter wiht a record profit. Given the 50% run up and the all clear coming from the pundits on CNBC they are luring the average Joe and Jane in at the very time these financial institutions are getting out. Eventually when everything collapses the average person is out again. FYI – insider trading in july was 4.16:1 i.e. four sellers for every buyer on the inside. The last time there were numbers like this was in the summer of 2007 – and we all know what has happened since. Patience is all you need espeically when you are dealing with a HELOC. The money isn’t going anywhere – unless you move.

It seems to me that it will be quite hard for stocks to go down too much at this point. There is so much cash sitting on the sidelines that every time it goes down, it seems to bounce right back from investors on the sidelines waiting for pullbacks.

FT, still wondering about FTSE RAFI US 1500 Small-Mid ETF in your SM… I think your were planning to have a follow up, but maybe I missed it?

As for the correction at some point, Sept is historically a bad month. I also have an article with an economics professor you might find interesting…



I have IAG, IGM and MX. MX is a “specialty chemicals” play but I think of it as energy since it is concerned with methanol. It is a bit of a proxy on the price of oil and it has doubled from its 52 week low but is still far off its 52 week high.

At this point in time, my interest costs are about 55% of my dividend income before taxes.


From http://www.investorsfriend.com/S%20and%20P%20500%20index%20valuation.htm dated August 5, 2009.

A quick indication of whether or not the S&P 500 index is fairly valued is normally available by simply looking at its P/E ratio. Unfortunately , at this time it is not clear what the P/E ratios on the S&P 500 is. As of August 5, the S&P 500 closed at 1003 and had a P/E ratio (based on actual reported earnings in the past year) of 130. This is extremely high. Therefore the quick indication is that the S&P 500 index is extraordinarily over-valued at this time at 1003.

However this would be jumping to conclusions.

Earnings on the S&P 500 index have recently been depressed by huge losses at a few major companies and may not represent the normal expected earnings level. Meanwhile the forecast operating P/E on the S&P 500 from Standard and Poors itself, based on eliminating all unusual gains and losses and based on the summation of such forecasts by individual companies is relatively low at 15.6 indicating that the index is reasonably valued.


Good points. Time will tell. “Earnings” have been beating expectations the real indicator – revenue – is down 20-30% y/o/y.


A quick and easy place to start is right here…


They peg IAG at 8 years of consecutive increases. Like other insurers they’ve been hit harder than the banks.

They have a very high payout ratio like MFC so it may be worthwhile to wait and see if they cut their dividend.

cannon_fodder, that’s a great site! One handy column that I could pull into Excel for a few companies I’m watching!

I agree. Thank you for the link to that site, cannon_fodder. I have been using globefund and morningstar to get most information. This site is much more user friendly.

Thanks for the link cannon….

Matt, I couldn’t agree more with your pt. 5 in # 17.

Trying to be patient….just saving cash for some buying in the future :)


You’re all welcome. There is a US site with a slightly different spelling if you are interested in US equities.


Tom – yes, I’ve used Excel’s feature to get fresh data from the site and manage to create my own reports.

First off I admit to being from the US so I might not understand the Canadian way of doing things but bear with me. I love the way you are doing leveraged investing but I’m wonder what made you choose to risk this money in the market? Have you looked at any other investments the might give you solid returns without the swings or risk of loss?

Sorry I thought of another question…what about the taxes on your investments? Are you netting the taxes from the portfolio or paying them out of pocket? Would a strategy such as the one mentioned in https://milliondollarjourney.com/using-universal-life-insurance-with-corporations.htm work here? Help you manage taxes, reduce risk, etc, etc.

Hi Matt,

As Cannon pointed out, the very high P/E of 143 is not meaningful, since they are based on extremely depressed earnings. Based on forward earnings, the S&P500 is reasonably value at about 15, and based on normalized earnings, it is actually quite cheap.

Also, your comment: “There has not been an end of any recession in history where P/E ratios of major indices did not reach single digits.” is not accurate. In fact, almost 100% of recessions did NOT end with P/Es in single digits.

Single digit P/Es in stock market history have resulted only from extremely high inflation (because high interest rates are correlated to the inverse E/P) or from major depressions.


Hi FT,

Why is everyone focused on a small correction in a major recovery?

If you recall our article in March “Irrational Pessimism”, we expect that 2009 will be seen in the distant future as the best buying opportunity during our lifetime. There has been a huge runup since then, but this is only about 1/3 of the decline, so there is still lots of room to run.

We still need a gain of more than 50% to get back to the peak.If you look back to 1950, the longest the S&P500 has taken from the bottom to reach a new all-time high is 4 years. If you look at the mid-term, instead of the short term, the chance of well above average returns is very high.

Our fund managers are still telling us they are finding more, cheaper companies now than any time since 1974. This is not really true in Canada, but in the US and globally, value investors are still very excited about all the opportunities.

The talk of a correction has been all over the news. It is essentially obvious, since the markets don’t go straight up. However, nobody knows when it will happen. What makes you think we won’t get a 10% correction after the next 20% rise?

Focusing on the short term if usually not effective. We would suggest to make sure you are invested for the next 100% uptick, instead of trying to miss the next 10% downtick.


I don’t believe in leveraged investing.
I rely on the companies that I invest in to do my leveraging for me.
Buying a lottery ticket is high risk investing as well!

Hi Bill,

It all comes down to the level of risk you are comfortable with and the level of confidence you have in your investments. Investing in individual companies is already more risky than broader portfolios.

Lotteries are not investing. With investing, the odds are in your favour in the long run. With the lottery, the odds are sharply against you.



Teck has announced that, once they retire their $2.5B in debt, they will reinstitute the dividend. In fact, the CEO would like to pay back the suspended dividends. One thing he noted is that mutual funds that are geared towards dividend payers obviously had to sell Teck when they suspended the dividend.

If I remember correctly, you got out of Teck after making about 20% on the stock. Could you see yourself getting into Teck if it reinstitutes its dividend (thus help diversifying your SM portfolio) even if it is in the $40’s?