October 13, 2008, 6:00 am

My Smith Manoeuvre – September Udpate

by: The Financial Blogger    Category: Smith Manoeuvre
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You may have noticed that I didn’t do a Smith Manoeuvre update during September. It was true that my investments were going down the toilet at that time but this is not the reason why I didn’t post about it. Since I was going down the toilet too, I stopped writing posts during the first 2 weeks in September due to my illness. I would say that this is probably the biggest advantage of working with 2 to 3 weeks posts in advance in my draft bin. I also decided to report my investment portfolio on a quarterly basis.



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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Comments

What kind of HELOC rates do bank employees get?

by: The Financial Blogger | October 13th, 2008 (7:40 am)

MDJ, it depends for which bank you work.
I pay Prime -2, so 2.5% right now. I actually to pay taxes on the spread between this rate and the prescribed rate but it still makes about Prime – 1 net of taxes.

FB, wow, that is a huge advantage with leveraged investing. Are the dividends in your portfolio more than your interest expense?

by: The Financial Blogger | October 13th, 2008 (11:59 am)

I actually leave everything in my SM account so I didn’t look at how much I was getting in dividend to pay off the interest.

I will actually do some research on preferred shares for my SM and get back with the result in another post. Some preferred shares can give a 6% dividend yield and they don’t fluctuate much.

[...] in September, I announced that I would post on my Smith Manoeuvre strategy on a monthly basis anymore. Believe it or not, it was not related to what was happening on the [...]