February 4, 2008, 7:00 am

January Smith Manoeuvre Update

by: The Financial Blogger    Category: Smith Manoeuvre
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The end of January has been very interesting on the stock markets. On Martin Luther King’s day, the TSX plunged 600 points. This jump was led by the financial industries who does not end their “unexpected provision for losses”. The next morning, everybody’s eyes were turned on the S&P 500 and the Dow Jones. We were all expecting a black Tuesday. I almost shorted the market as I was convinced that the TSX would continue to drop. Instead, the Fed announced a huge decrease of their interest rate.

house cash

 

As the Bank of Canada dropped their rate a few hours after this announcement, the TSX went back 500 points up! It’s a pretty good thing I not short the market as I was planning to! Anyway, I don’t think anybody should do yo-yo trading 😉

 

As I only hold a dividend fund in my Smith Manoeuvre Portfolio, things are not too pretty in this beginning of the year. I’m now down by $519.40 for a negative yield of 8.53%. I basically continue where I left my strategy last year; in the red!

 

However, the market heavy fluctuations might open the doors for more bargains. In this beginning of the year, I was planning on increasing my Smith Manoeuvre monthly investment. Instead, I decided to pay down my line of credit and build more equity into my house.

 

Am I starting to choke because of the market? Absolutely not! I am actually preparing my portfolio for the bear market. I will continue to buy mutual funds on a periodic basis with my $450 per month. Once I paid the interest and invest money in the Smith Manoeuvre, I have an additional $260 per month that will be applied to the owing balance of my HELOC.

 

So While I am presently average my cost down with my periodic investment, I am building a safety net big enough to inject more money in this project or maybe use it for something else (RRSP contribution, buy a rental property, buy another car?)

 

I don’t know for how long the market will continue to drop, but I will accumulate enough equity to buy more stocks or mutual funds once “I think” it will be over. The key part is that nobody knows when it will start to go up again. We are all guessers 😉 One thing is for sure though, I will certainly be making a good deal buying stocks that drop after the market sink by 15%!

 

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Comments

Just out of curiosity what financial planning firm are you now working for?

yeah looking for beaten stocks is what I am doing right now.