June 7, 2007, 2:23 am

Is the Smith Manoeuvre is a Secure Way to Create Wealth? Part 1

by: The Financial Blogger    Category: Smith Manoeuvre
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Some people might think I’m talking about the Devil when I write about the Smith Manoeuvre. In other cases, they might think I am promoting just another way that financial consultants found to sell more funds. In fact, I believe that the Smith Manoeuvre is a strong financial tool creating wealth over time while turning your mortgage into a tax deductible debt. Is it a safe way to make money off your property? I think so.

First things first, have you ever consider that you are sitting on thousands or maybe hundred of thousands of dollars and you are not making this money work for you? Do your really prefer to wake up at 6AM in the morning and working all year long than having your property working for you. Some people might say that you rather be sleeping until 6Am than suffering from insomnia due to your portfolio fluctuations. I don’t think it is a good reason. But what if?

See, “what if” is the real risk. What if you lose your job tomorrow and you can’t afford to pay your mortgage? What if the market crashes and you are left with nothing at the end of the day? What if interest goes up and you can’t keep up with the mortgage payment? What if you sell you house? What if?

How many people do you come across that will simply try to break your projects and dreams? In fact, they will do it for two reasons. The first one is because they are jealous of what you have or might accomplish. If they don’t succeed, they will surely do not want you to be a winner. They prefer complaint about their bad luck and drag down everybody they know with them. This is why they are asking you what if?

For the others, they just don’t understand fully what you are trying to do or they want to learn more about it. Although it is a negative approach to understand something, asking what would happen if the worst case scenario happens is not necessarily a bad way of seeing things. At least, they are trying to see the full picture. Those people will challenge your choice and they are very useful to test your mind and theories.

Nonetheless, I don’t think the Smith Manoeuvre is a safe way to make money just because some people don’t think so. There are several risks that you will encounter during a Smith Manoeuvre. However, I think that risk is only a perception of human beings of the unknown. There is no such risk until consequences really happen. We will discuss such risk further on another day. Since then, please send me your comments and thoughts about the Smith Manoeuvre. I just love to be challenged!

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Well, just read your post and thought I would comment. First of all, I can’t agree more with people being afraid of the unknown. As a 30 year old homeowner, I recently converted my mortgage to a re-advanceable SM mortgage. I couldn’t be happier with the how it’s turning out

I try to relay how it works as I’ve done a LOT of research, reading, and explaining to my friends and such, but none seem to interested in it. To me, it’s a “life-changing” thing. Looking forward, I will probable have my mortage converted to an investment loan in 10-15 years.. as opposed to 25 this is extremely good news to me. Yes, I realize that I’m going to have an investment loan equal to the amount of my house.. however that investment is working for me! and the interest I pay on it is tax deductible! Hell, once my mortgage is paid off, I can use the tax deductions on the interest to make lump sum payments on the loan if I wish!

Anyhow, I’ve also another leverage loan which I won’t go into discussing too much here as it’s a ROC mutual fund which some folks dont’ believe is a good investment or worth my time. I know what it is and what it isn’t, but my future sure looks a lot brighter now that I’ve discovered these tools for investing.

One thing I’m certain of, I love the idea of my money working for me!

Thanks for the great blog, it’s a joy reading it..


by: The Financial Blogger | June 7th, 2007 (2:20 pm)

Raff, thank you for your kind words.
It is sometimes though to go against most people’s beliefs, but leveraging sure pays! When you look on how people got rich, most of them leverage into their companies, properties or investment. But they leverage!

[…] I am trying to establish a more disciplined investing strategy. I determined my priorities for my smith manoeuvre strategy and it works pretty well so far. Now, I am trying to do the same thing for my RRSP. If most fund […]

Hello Again!

I’m still reading your BLOG, and I can’t believe that it’s been a year since the post I made above.

I would like to state that as of today, I have 10% of my mortgage paid off. In a year! I certainly hope I can keep this up, as it would mean in less then 10 years, I would be mortgage free. In the past year I have done just a few things:

a) doubled up my mortgage payment 3 or 4 times, I can’t remember exactly.
b) took my tax refund, which was almost 2 mortgage payments (due to my large ROC fund I have and the interest payments on the loan on it) and applied it to the mortgage.

One thing that I have not done however, is actively invested ALL of my available equity or HELOC. I have about 3% of my total mortgage available for me to invest, I’m just waiting and trying to research where I should put it.

Anyhow, thought I’d post as I read your latest article, and could relate.. then seen my old post. ha!



by: The Financial Blogger | June 20th, 2008 (5:18 am)

Congratulation on your progress! this is amazing!

Don’t be in a hurry to take your equity and invest it. Leverage strategies are not meant to be rushed 😉 I’m sure you’ll be successful!

Keep it up!