June 5, 2007, 2:25 am

Live Smith Manoeuvre Example, June Update

by: The Financial Blogger    Category: Smith Manoeuvre
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Another month pass by as my mortgage is slowly transferring to a tax deductible debt. On June 1st, I bought more National Bank Dividend mutual funds. My goal is to accumulate enough to buy other funds such as Sprott Canadian Equity fund which requires a minimum investment of 5K.

My investments account shows $2,297.31. This was not a really good month for me but the key is longer term investing. The reason why I’m doing a monthly update is too show fluctuations that you may come across with leveraging strategies. You need to be able to face bad months and good months without taking emotional decisions.

My tax deductible debt account show a balance of -$2,300 as I just withdraw another $600 to buy more funds. Last month I paid $4,67 in interest charges.

Here is a quick chart to show my situation over the pass months.

Months Debt Investment Interest Paid

April $1,700 $1,705.38 $3,50

May $2,300 $2,297,31 $4,67

Hopefully, my next month will show better results. Keep on investing!

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Comments

You mention that it was a bad month…why was it bad? Maybe you should put the investment return if that’s what you were referring too?

Which mortgage product do you use with the SM?

Hi FP,
The NA dividend fund dropped during this month (I was + $5,38 and now I’m losing about $3). I also have to count the fact that I paid a little bit more than $7 in interest for the past 2 months. Those are obviously not big number as I just started my Smith Manoeuvre. It will probably become more significant over time.

Hi MDJ,
I use National Bank’s all-in-one. You have the possibility to open more than one sub-account and they can have flexible limit. Therefore, I’m making my mortgage payment in account #1 and take money to invest from account #2. Both limits fluctuate automatically with withdrawals and deposits. It is definitely a great product to use a Smith Manoeuvre.

Cheers,

FB.

Do you have your regular chequing account with National Bank also? I’m looking at using BMO’s readiline mortgage, but it may be a pain where I use CIBC for my main banking needs.

FB – what interest rate do you have on the mortgage? or is it at prime as well?

MDJ,
I do have my checking account at NBC. Depending on how you want to setup your payment, you might switch over to BMO completely. If you are making a monthly payment, it won’t make a difference. However, you can have more than 1 pmt a month taken for your line of credit. You have to do it the reverse way (from your bank account to your HELOC instead of the HELOC taking a pmt intor your bank account).I pay my HELOC on a weekly basis in order to pay less interest and add up 2 additional payment over the year. However, you need a bank account that allow you to send more than one pmt into your HELOC. Another option is to use one sub-account as a regular checking account. Many people do so as it is very practical.

FP, I don’t have a mortgage, it is just a big line of credit split between several sub accounts. Everything is at Prime – 2 as I am an employee.

Cheers,
FB.

Prime – 2!! That’s a pretty good discount!

it is ! but keep in mind that the prescribed rate is now 5%, which means that 1% counts as a taxable benefit. Anyhow, with that rate, it is worth leveraging !
FB.