March 10, 2008, 7:00 am

My Smith Manoeuvre – February Update

by: The Financial Blogger    Category: Smith Manoeuvre
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I finally happen to buy the Sprott Canadian Equity funds last month. It took me about a year to put 5K aside in order to qualify for this investment. In fact, I have been slowed down by the National Bank Dividend Fund that didn’t do so well over 2007 (if you know any dividend fund that did, please include your comment at the end of this post!). Even though I had to register a small capital loss, I still think it was the right thing to do.

bear bull

The only secret about investing is to follow your investment strategy until the end. I can tell you that you are assured to lose a lot of money if you keep switching back from one strategy to another and try to time the market. Be consistent, be systematic and don’t panic.

For those who have been following my Smith Manoeuvre Strategy, you already know that I ended the year in the dark red (about 9% down). For those who just started to read my blog, I strongly suggest you go visit the Smith Manoeuvre Category in order to know more about this financial technique.

Well it seems that 2008 will bring my investment return in the green if everything keeps going this way. I bought the Sprott fund at $42.939 and it is already at 47.21. My overall portfolio is showing a +6% return!. Even though I am well aware that this fund is much more volatile than the NBC Dividend, it is always a good news when you see your money growing (especially when it’s other people’s money!!!).

Since I invested most of my Smith Manoeuvre portfolio in one fund (about 80% of the portfolio value), I thought I would give a little bit more information on it. According to Globefund.com, here are the important stats about the Sprott Canadian Equity fund:

 

Number of Year

Investment Return

1

10.21%

2

14.62%

3

20.10%

5

25.44%

10

28.68%

Since Inception

26.59%

– The fund was created in 1997 and therefore went through the techno bubble.

– If you would have invested 10K in 1997, you would be smiling with a 121K in your account now J

– This is a very aggressive Canadian fund with presently 94% in Canadian stocks and 6% in cash.

– They currently hold 72% of their portfolio in materials and 11% in energy sectors.

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image source: stanart.com

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Comments

I’m also a big fan of the sprott small caps fund. Do you know if this fund has any distributions? I’m particularly interested if it contains any Return of Capital.

FT

I came across your blog a couple of months ago while reading about the SM, and have been enjoying your posts.
Being that I’m also a Quebecer, I was reading about how Revenue Quebec limits the amount of interest you can deduct to a maximum of your investment income for the year. Correct me if I’m wrong, but wouldn’t that mean that if you owned shares for the purpose of capital gains, you would either have to sell them each year to be able to claim as much of a refund as you can, or simply carryforward the loss to a year when you have more investment income (which means you have to delay any refunds)?

by: The Financial Blogger | March 10th, 2008 (8:36 pm)

Hey FT;
here is what I found on the Sprott Small Cap distribution policy:

In each calendar year, the Fund will distribute to its investors a sufficient amount of the Fund’s net investment
income and net realized capital gains so that the Fund will not pay any income tax. The net investment income and
the net realized capital gains of the Fund will be distributed annually in December to the Fund’s investors. All
distributions paid to an investor of the Fund will be reinvested automatically in additional units of the Fund at the
net asset value without any fee.

Will;
In order to avoid this issue, you are better off with mutual funds. Most of them will distribute a part as interest (look at the explanation on the Sprott Small Cap above).

It is true that Qc gov is limiting us for the interest deductibility 🙁 This is the price to pay to live in the Province of Snow ;-D

Cheers 🙂
FB

This blog post has been included in the “Carnival of Money Stories #51” at Life Lessons of a Military Wife. Hope you will drop by and read some of the many other wonderful entries received this week!

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