Another quick month passed by and I just sent another $400 in my smith manoeuvre investment account. So far, I invested $4,9,44 and my investments are at $4,857. This means that I am still showing a negative return of 1.76%. It seems to be pretty stable from months to months but I would definitely like to see some green figures in my Excel spread sheet!
Interest keeps pilling up for a total of $60 for the year so far. This is one thing I really like about the Smith Manoeuvre; you start leveraging with a tiny amount of money. Therefore, you have the chance to learn from your mistakes and gradually become comfortable with the amount of the debt. I must admit that I prefer to see my little $4,800 owing in my Smith Manoeuvre line of credit than looking at my 185K negative balance on my mortgage!
A mortgage debt looks scary to me for two reasons: the first one is because it is a huge amount. It is not like I could write off this debt in a heartbeat. I must remind myself that I will take twenty five years or so to pay it off. Or in my personal case, take about twenty years to offset it with enough investments in my Smith Manoeuvre account. The second thing that bugs me is the fact that this debt is not related to an asset that grows over time. It is true that the recent bullish market for properties could make you think that properties are as good as stocks but it is not the case. In fact, over a long period of time, property values increase at the same rate than inflation. Therefore, you should not count on your house’s appreciation on the market to make a decent profit.
Speaking of property values, I just sent all my stuff to my banker so I can increase my HELOC. The goal behind this operation is very simple. I already have a car loan and some other debts I would like to put into one single payment. I know I will amortize the payment over a longer period of time, but I care more about cash flow than the total interest paid over time. If the operation is a success (sounds like a medical operation isn’t?), I should be able to reduce my monthly expenses significantly and therefore get closer to my $1,500 project. I usually get a raise in June so I need to find other ways to reduce my expenses or increase my overall income since then! Anyway, I highly doubt that my raise would cover $1,500 a month!
If my property is appraised high enough, I might send a couple of hundred bucks into the Smith Manoeuvre again in order to be able to enter into the Sprott Canadian Equity fund. I recently checked and the fund was still opened. Sprott is fairly aggressive in his funds but also shows a good reputation in term of return on investments. Once I bought my first 5K shares, I will continue with the National Bank Dividend fund with my monthly investments.
As many readers did it in the past, if you have any questions regarding the Smith Manoeuvre, please feel free to email me at thefinancialblogger(at)gmail(dot)com.
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