June 8, 2009, 5:44 am

Invest or not to Invest; that is the question!

by: The Financial Blogger    Category: Investment, Market and Risk
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For the very first time of my life, I have a financial dilemma. Since I work in the financial industry and I am constantly facing people with dilemma, I rarely have my own as I am used to find solutions to all problems. However, I didn’t face a similar case of my own.

About a month ago, my wife quit our job and we had to change a few things in order to make sure that this decision was financially viable. As I mentioned before, I had to stop my Smith Manoeuvre Strategy and I decided to cash in my investment in order to make sure I had my emergency fund liquid (I didn’t want to depend on the market over short term).

However, I am now in a position where I will probably make enough with my bonus to compensate my wife’s income loss and our internet company keeps rising. So I am already thinking about investing again.

The problem is that my bonus is still uncertain and comes only at the end of the year (I’ll know the amount in November and it will be payable in January 2010). The other thing is that even though our online income is rising, I still consider the income stream unstable and I don’t know what to expect since the company is operating only since March 2008.

I’m sad to see a great opportunity (the current market) slowly going away while I don’t do anything… I saw Canadian Banks stock surging by 40% since last December. As I work for a bank, I was convinced that they were under priced. I kept buying 8% of my salary in Canadian Banks but I think I could have made a much bigger hit by trading as I wanted.

I am still under this impression and I can’t do much about it right now, unless I jeopardized my core finance situation (i.e. withdrawing the money from my line of credit and therefore squeeze my option if I ever need money in 2 months).

I am actually tempted to build my TFSA with bank stocks. I could buy 100 shares of 2 banks (one TFSA for me, the other one for my wife) and I would own a total of 3 different banks (as I already have shares of my employer). While this can be considered a risky investment strategy as I would be heavily concentrated in banks, I truly believe that Canadian banks are strong enough to keep giving their high dividend and grow over time. So if I borrow at less than prime and I receive a 5% dividend yield, my interests are being paid by my stock and I still have money in my pocket…. Quite interesting!

Then again, I would eat all my liquidity and if I ever have a bad luck, I would be stuck with my bank stocks, hoping they worth something when I need them! Any thoughts?

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Consider an unsecured credit line as an alternative to an emergency fund? I have one for $20,000 and a $0 balance. I will do my Smith Manoeuvre within the 80% equity on my house, the unsecured line is there if I need it.


If the money is for emergencies, you might want that liquidity (you never know). I vote liquidity. Good luck!

If you borrow to invest you have a cash positive scenario. Although you should have the funds in a taxable account because the interest is deductible.

by: The Financial Blogger | June 9th, 2009 (5:39 am)

good point, but I have already used my unsecured line to buy my house a few years ago and since my rate is the better on the unsecured line (because I am a bank employee), I figured it wasn’t a good idea to pay it off 😉 hahaha!

I think I’ll stick with the liquidity for now 😉