May 7, 2007, 5:54 pm

A Live Example of the Smith Manoeuvre

by: The Financial Blogger    Category: Smith Manoeuvre
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After reading many things and calculate several scenarios, I decided to apply the Smith Manoeuvre strategy to my own situation. Since I think there is nothing bad about making money, I’ll post monthly update of my situation. What could be better than a live example to show the good and also the bad sides of this strategy?


Here’s a little pitch of my situation. I’m still pretty young and bough a new house a few months ago. I paid 255K and put 25% cash down (that’s $63,5K). I’ve already setup my mortgage as an HELOC split into 3 accounts with variable limits. I pay 4% of interest charge (that is Prime – 2. I know, I had a great deal there!). Finally, my marginal tax rate is set at 38%.


I started the Smith Manoeuvre almost as I bought my property. I put a first $500 as it was the minimum required to buy the National Bank Dividend Fund. Then I set up an automatic withdrawal of $600 a month to purchase the same fund. Why starting with only one fund and why this one?


Some of you might think that I don’t diversify my portfolio and I should buy several types of funds. In fact, the Smith Manoeuvre represents only a portion of my investment portfolio. I have other investment in other funds and stocks in the market.


There are several reasons why I decided to go with the National Bank Dividend Fund. The minimum investment required was minimal and therefore I could start the strategy right away. There is no close end fee which means that I can sell my funds anytime I want without any penalty fees. I also appreciate the dividend funds as they buy only stocks from well established companies such as banks and insurance companies. The last reason but very not the least is because this fund is one of the least volatile dividend funds on the Canadian market.


I’m definitely not promoting this fund as they are many other ones that can do as good as and probably better than this one. However, you must find a fund or a group of funds that will meet your needs in term of risk tolerance and investment time horizon.


Each month, I’ll post an update on my personal situation. This will be a true and live example of the strengths and the flaws of the Smith Manoeuvre Strategy. I hope to prove that it works!

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[…] I stated in my previous post, I am going to post monthly updates of my portfolio and debt account related to the Smith Manoeuvre […]

Do you mind me asking how you got a Prime -2 HELOC? I recieved Prime, and thought that was decent. Congrats.

by: The Financial Blogger | June 13th, 2007 (2:31 pm)

Hi TP,
That an employer’s rebate. I didn’t find HELOC below prime beside that so you have the good thing!

by: The Financial Blogger | June 13th, 2007 (2:32 pm)

Hi TP,
That an employer’s rebate. I didn’t find HELOC below prime beside that so you have the good thing!