This is where your finance takes place

In fact, my original repayment plan was the following: 2 years ago, I wanted to start a Smith Manoeuvre and reimburse the debt after 5 years with this money. While 5 years is a little bit short for a leverage strategy, I was willing to take the risk as my income is still increasing at a steady rate years after years.

Now 2 years had passed and I only started my strategy last year. In fact I did put in place the SM 2 years ago, but I had to cash in all my investment when I bought my second house. This is why I don’t have this much in my account.

So considering that I have now $7,100 in the account (still positive, yeah!) and that I invest $400 per month, I would get about 19k at the time of repayment. Hum… it seems that I am not going to payback in time, right?

Well this is because I decided to not put everything in the Smith Manoeuvre. Am I getting nervous about the market? No way! But I am getting nervous about the fact that I need 31K in 30 months and I don’t think it is too smart to invest that money in highly volatile funds like the Sprott Canadian Equity Fund.

Therefore, I decided to pay back a part of my mortgage at the same time. So there is another $450 per month used to pay down my mortgage. So in 30 months, I have about $13,5K in equity in my property. In the end, chances are that I will be able to refinance my mortgage, reimburse my debt and not touch my Smith Manoeuvre Investment.

So the strategy is steadily going on without much difference this month. I still shove another $400 into it and, thx to Mr. Sprott, the account is positive for a third month in a row :-D.

The idea of buying international funds is still on the table but since I didn’t have much time to think about it recently, I am not planning on making any move in the short term. I’ll probably reconsider this option later on this summer, once all my exams are done!

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In fact, my Smith Manoeuvre account was showing a total of $6,609 for an overall profit of $109. Since it’s been a full year in February, I decided to go a little bit further in my calculation in order to establish my real rate of returns with my systematic investments.

For simplicity and convenience, I always use what I have in my portfolio divided by what I invested. However, I know that this is not the real rate of return as I didn’t have 6,5K invested the whole year. I built this amount month after month.Another great thing about working as a financial planner is that you have access to all kind of tools built in Excel.

Therefore, I don’t need to bust my mind creating a system that will allow me to calculate my return on investments. I simply have to plug in the numbers!So the real number is 2.7%. I think it is pretty good considering the bad year we had. I believe that if I can continue this way in 2008, I will be more than ready to boom in 2009!

Now I am thinking about my next move in term of diversification. The major flaw in my investment strategy is that I am only invested in the Canadian market. I am now looking for an emerging market fund like a BRIC related fund so I can diversify my investments. If you know any good funds, let me know, that will help me out in my research.

I recently had to put all my stuff together in order to prepare my taxes. This is where I realize that having a separate account for my Smith Manoeuvre was a real charm. It took me 2 minutes to pull out the statement and calculate the amount of interest paid. I shove everything in an envelope and my accountant will take care of the rest!

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The only secret about investing is to follow your investment strategy until the end. I can tell you that you are assured to lose a lot of money if you keep switching back from one strategy to another and try to time the market. Be consistent, be systematic and don’t panic.

For those who have been following my Smith Manoeuvre Strategy, you already know that I ended the year in the dark red (about 9% down). For those who just started to read my blog, I strongly suggest you go visit the Smith Manoeuvre Category in order to know more about this financial technique.

Well it seems that 2008 will bring my investment return in the green if everything keeps going this way. I bought the Sprott fund at $42.939 and it is already at 47.21. My overall portfolio is showing a +6% return!. Even though I am well aware that this fund is much more volatile than the NBC Dividend, it is always a good news when you see your money growing (especially when it’s other people’s money!!!).

Since I invested most of my Smith Manoeuvre portfolio in one fund (about 80% of the portfolio value), I thought I would give a little bit more information on it. According to Globefund.com, here are the important stats about the Sprott Canadian Equity fund:

- The fund was created in 1997 and therefore went through the techno bubble.

- If you would have invested 10K in 1997, you would be smiling with a 121K in your account now J

- This is a very aggressive Canadian fund with presently 94% in Canadian stocks and 6% in cash.

- They currently hold 72% of their portfolio in materials and 11% in energy sectors.

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image source: stanart.com