Back in February, I have made a few changes in order to get a better diversification in my Smith Manoeuvre investment strategy. Therefore, I decided to add US, Canadian and International index funds. Unfortunately, I noticed in March that all my transactions have not been done according to my instruction (it is apparently quite a feat to write down 4 transactions!).

Nonetheless, I have made some great picks since my new investments really picked up during the March Rally. It is good to see that my Smith Manoeuvre account is showing a positive year to date return or 4.2%. Overall (since February 2007), my Smith Manoeuvre account shows a negative return of -25%. It is obviously quite tough to compensate for 2008 in a single quarter! It will actually going to take years to come back to a decent level.

So here’s what my portfolio look like as of March 31^st:

- National Bank Divided Funds: $4,942

- Sprott Canadian Equity: $3,163

- Omega preffered shares: $101

- Omega American consensus: $183

- Altamira Canadian index: $0

- Altamira American index : $177

Total in my Smith Manœuvre : $8,566

I am still not convinced from the March rally that the stock market is back on track and that everything will come back to normal in 2009. While I believe we will see our money back (for those who are still invested in the market!) and that it is currently an opportunity of a lifetime, what happened in March just seems unreal. On the other side, what happened back in September and October 2008 seemed unreal as well! This is why I stick to my investing strategy no matter what I think and I am not trying to sell to make a quick profit and come back into the market after the next correction. I still think that you should not do market timing.

I am now investing $500 per month into my leverage strategy and I don’t plan to make much modification for a while. I will look at what is going on on the markets and look at my investment strategy next quarter but don’t expect many changes. I think I will keep this investment strategy for the upcoming year and keep dollar cost averaging the market!

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I have not been writing much about The Smith Manoeuvre Strategy for the past months because I was simply too lazy to make some modifications to my investment portfolio. I was aware that I had to do some tweaking for my investments strategy.

I am heavily concentrated in financials (National Bank dividend fund) and in oil and other natural resources (Sprott Canadian Equity Fund). But the most important part: I am 100% in the Canadian market.

Now that the market is down and that everybody is selling the stocks cheap, it is the perfect timing to buy more shares of good mutual funds. I would rather go by trading indexes but since I am injecting money on a monthly basis into my portfolio (and it doesn’t show much these days ), I have no other choice but to pick funds instead of indexes.

So I cancelled my $400 periodic investment into the National Bank dividend fund and decided to split this amount among 4 funds. On top of that, since I am paying a very low interest rate and that I have enough cash flow to afford it, I decided to increase my monthly investment to $500.

$100 in Altamira Canadian Index Fund

I wanted to keep of my monthly investment into Canadian equity as I think that the Canadian market will go up over the long run. There are several good undervalued companies that will pick up on the next economic boom. On top of that, the Altamira MER’s is only 0.53%. So I will be almost on the target to follow the index.

$150 in Altamira US index fund

Based on the same reasoning regarding the MER’s, Altamira indexes funds are pretty cheap and the US fund is hedged against currency risks. I wanted to start diversifying my risk with another country. As the American market took at good kick in the teeth in 2008, I think it’s a perfect timing to buy an American index fund.

$150 in Omega preferred shares

Canadian preferred shares are mostly issued by financials, insurance companies and resources companies. Since they took a major hit in 2008, we have great chances to see this type of class coming back with great strength. In addition to that, the Omega preferred shares (managed by ING) is the first Canadian fund of being 100% invested in preferred shares.

$100 in Omega American consensus

Why am I putting more money into the American market? Because I love the way the Omega American consensus picks its stocks. To learn more about the trading model developed by Validea capital, you can click here and read about my review of their Omega funds. Their trading method is based on mathematical models and, therefore, gets rid of all kind of emotions in the trading equation.

I decided to pick American consensus instead of international for 2 reasons. I truly believe in the American market capacity of coming back stronger than international equity. The second reason is based on the fact that many great American companies make a lot of their revenue outside the United States. Therefore, I am still expanding my diversification a little bit to the international market.

Disclaimer: I am buying those funds but this post should not be considered as any kind of recommendation of buying or selling any of the above. Please trade carefully …and at your own risk!

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Related Post

• My Smith Manoeuvre – 1st Quarter Update
• My Smith Manoeuvre – June Update
• My Smith Manoeuvre July Update
• December 31st Smith Manoeuvre Update
• A Live Example of the Smith Manoeuvre

I have made monthly investment in the National Bank Dividend mutual funds and the Sprott Canadian Equity funds. Over the past 2 years, I have made a total investment of $10,100. This money was taken out of a separate HELOC to make sure that interest is tax deductible. Borrowing cost for 2008 has been $198.73. Therefore, I should receive a tax return of $83. Barely enough to buy 2 good bottles of wine

I have encountered difficulties when asking for additional credit at my bank. The main reason was that they didn’t understand the strategy and therefore thought that I had been paying interest only on my mortgage without making any capital reimbursements. They didn’t want to understand the link between my brokerage account and the borrowed amount on my second HELOC account.

I was able to get what I wanted but it wasn’t without pain, a lot of documentation and explanation! Considering the current economy, I can’t blame them; all they were seeing is a young kid with a big line of credit maxed out for 2 years.

I was supposed to invest into international funds in order to diversify my risk and optimize my long term yield. While I am still wondering if I’m better with ETF’s or specialized funds, I decided to not budge. The Problem with ETF’s is that I can’t buy them on a monthly basis. I would have to wait until I have sufficient money to buy at least 100 shares. The thing is that I don’t want to put my SM monthly contribution into a money market fund. I should probably go with index funds in the meantime then.

I was a bit disappointed with the annualized return that my account shows after almost 2 years of investment. I actually have a negative annualized return of -27% since February 2007.

Hopefully 2009 will be a better year for all of us in regards to the stock market!

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Related Post

• December Smith Manoeuvre Update
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This will give me the opportunity to discuss about more things and not only write a few lines about how much I made or I lost during that month. I was quite surprised to find out my annualized return at the beginning of this month: a big fat – 40%.

I can’t say that I am smiling but I am not panicking as well. Huge fluctuations are yet to come for the next 6 months and there is actually no reason to open your investment statement since mid 2009! You simply have to make sure that you have a solid investment strategy and that you keep going.

One of the biggest advantages of the Smith Manoeuvre is that you benefit from the systematic investment strategy. By buying every month, you have the possibility to average down your costs and get more shares.

Because of huge market fluctuation, I decided to not change anything in my strategy for now. I am still buying $400 a month of National Bank Dividend Fund. Once the market settled, I will consider other options.

I was recently looking for preferred share issued by Canadian bank, they offer a 5 to 6% return and their value don’t fluctuate much since the main reason of acquiring such shares is the dividend. Since I pay below prime as a bank employee, this almost looks like an arbitrage option.

Hopefully my next update in January will be showing better numbers

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Related Post

• Live Smith Manoeuvre Example, September update
• A Live Example of the Smith Manoeuvre
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• Live Smith Manoeuvre Example, July update
• December 31st Smith Manoeuvre Update

Even thought a part of my mortgage is tax deductible, the market fluctuations make the strategy useless on a short term basis. Some months I am making money and others, like now, I am losing money. I am telling you, investing is not for the soft hearted

So in my Smith Manoeuvre account I have:

178.278 shares of National Bank Dividend Fund for $2879.19

116.444 shares of Sprott Canadian Equity Fund for $5065.31

Total portfolio worth $7,946.87 as of August 4th.

In my previous update, I said that I would purchase the Omega International Consensus fund. I feel ashamed to say that it’s not done yet. What is the reason? Simply lazyness. In fact, I just have to pick up the phone as changed my periodic investment strategy. The overall operation with the brokerage firm would take about 5 minutes. Too often, we let our financial sins take over our investment strategy.

Committing to your investment plan is tough but rewarding. This is why writing it down and have it on a piece of paper is relevant. Every trimester, you should look at your plan and determine if you are following it. It will also help you out seeing if you reach certain stage where modification in your portfolio is requested.

I am not talking about changing your investment strategy every time you get your investment statement and make stupid moves according to the market. I am talking about following the strategy you already designed for the next few years.

I think you should review your investment strategy on a yearly basis and make your decision according to your need and your financial situation; not according to what is going on the market!

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Related Post

• Live Smith Manoeuvre Example, July update
• My Smith Manoeuvre – 1st Quarter Update
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• December Smith Manoeuvre Update