August 7, 2007, 7:00 am

Live Smith Manoeuvre Example, August update

by: The Financial Blogger    Category: Smith Manoeuvre
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It is just incredible to see time passing by like that. Another month, another contribution to my Smith Manoeuvre plan! While we are still waiting for our little baby girl to come, I am taking this moment to see where I am at in term of investments.

A lot of things happened in July as the Bank of Canada increase its rate. Therefore, prime rate is now 6.25% as of July 11th. More changes happened into markets as the last two weeks of July were not as bright and sunny on the newspapers than outside my house!

Was it only big institutions taking profit out of the market, a small correction or the beginning of a bear market? Only time will give us the answer to this question. One thing is for sure however, you can feel the tension for the analysts more than ever. Since the beginning of this year (especially after the “Shanghai Flu”, markets are more nervous about fluctuations. I guess it gets to our head and sticks there: after 4-5 years of bull market, things have to drop. They can not just keep going. The more we think about it, the more chances we have that it will happen!

Anyway, enough with psycho-finance and let’s take a look at what is happening in my Smith Manoeuvre. Another $600 was added to my investment portfolio on August 1st. Therefore, I am at $-3,500 in my line of credit. My investments (plus reinvested divided) are at $3,477.91. I must admit that it went down my much more in the middle of the month, but that is only part of normal market fluctuation. Interest paid so far is $19,99. Therefore, I will receive about $8 in tax return so far. It is not really impressive, but at the end of the year, it will pay for McD’s!

I am getting closer to get to the 5K minimum to buy the Sprott Canadian Equity funds. I will have to check if the fund is still open for new investments (it was closed until last year). Since I am not there yet, I’ll keep the mystery for later! It will be interesting to see what the Sprott team will do in such fluctuating markets.

On another note, please check out the new edition of the carnival of personal finance at Frugal Law Student(Best Week Ever Edition). Since he is studying in Law school, I guess he will not have to be frugal for long! My latest article on Frugal VS Non-Frugal is also part of the festival of frugality at Frugalforlife.

Stay tuned for the next update of the Smith Manoeuvre at the beginning of September!

 

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Comments

Does this mean you have just $3,500 in equity on your mortgage? My banker dismissed my idea of opening the HELCO and doing the smith manoeuvre because I did not have 20% equity built up in the house.

Could you clarify.

by: The Financial Blogger | August 17th, 2007 (7:50 am)

Hi Dawger,
The $3,500 corresponds to the amount of principal I would have paid on a regular mortgage since I started my SM back in February. In order to setup a HELOC, you absolutely need a minimum of 20% equity in your house. This means that if your house is appraised at 300K, your bank will offer a HELOC for a maximum of 240K (80% of 300K). However, some banks offer this product up to 90% of the appraised value (I know National Bank has this product) but other specific conditions applies.
Hope this helps!

Thanks for sharing your real time experiences with the SM. I just started reading his book. I look forward to more of your updates.

I like the fact that the SM is a “gradual process”. This gives one some time to “get use to the idea” of not paying down the debt and to break out of the working class paradime that says we must run away from our mortgage debt as fast as we can.

CM

by: The Financial Blogger | August 31st, 2007 (1:15 pm)

Hi CM,
I’ll get September update probably by the end of next week. I always believed in the SM but never had a chance to do it. Then, I’ll be able to prove if I was right or wrong about it!

I heard the book was not that great. While I read a lot about the SM, I never read the “official book”. Let me know what you think about it!

Cheers,

FB.

So far I’m finding the book quite good and easy to understand. Its a quick and easy read. I wish I had read it back in the 1980s!

I just posted some coments on the book.