Do you still think that March was a bad time to start the SM? We’ve had a nice relief rally since then.

Our belief is that the #1 quality necessary for investing in equity investments is faith – in humans, markets, long term results and the ability of companies to adapt to market conditions. Our experience is that those that have faith in the markets tend to make money, while those fearful of markets tend to continually miss buying opportunities and end up only feeling safe buying at market highs.

Ed

When options are bought sold, I believe they are considered capital gains/loss. The rules state that the investment loan must be used to generate income. Even though we know that some capitals gains trading is ok, I’m really not sure about options as they don’t have the potential for income.

Again, you should contact an accountant to help you out with the details.

I’m in the process of starting SM but bit bogged down about accounting part. Know any accountants/advisors in Ottawa/Orleans area.

Anyways, I plan to start few Canadian DRiPs with OCP/SPP and invest in those using my investment loan. For those who don’t support OCP/SPP or are bit hard to get by, I plan to buy stocks from a broker and then transfer the share certificates to DRiP account (with TA), will it still make my loan deductible. Any accounting problems?

I plan to keep doing this for the whole duration of my investment plan. What happens if I do options to buy stocks?

Any input welcome!

Yes, you can take the entire LOC balance and invest right away. Then each time you pay down your principal you can reborrow that amount and invest it (after paying for any interest charges, of course).

So, if you wanted to get into the market in a big way, you would have the opportunity to do that. If you decided to invest in dividend producing equities, it would probably take a good 3 months before you see a good portion of dividends coming your way.

The formula is:

Home value x 80% – mortgage balance = heloc available

As you pay down your mortgage, the heloc available increases instead of staying static like a regular setup.

So in your case, if initial LOC available is $80k, the available room will increase by $275/month.

If I read correctly, once the mtg and LOC are set up, the LOC is only accessible to me when I start to pay down my mortgage?

i.e $500 principle paid down and now $500 LOC available to me to invest.

So ideally it is best to have a high mortgage balance so that I can have access to a equally high LOC.

* I was thinking that if I was set up with a LOC right from the start (say $80,000) that I could use that amount immediately to invest AND THEN as I pay down my mtg principle my LOC would increase in equal size?

Please confirm the top info and questions, but please do comment on this *. maybe I just need a good understanding from my Broker about what I do and how I have access to for this LOC.

Thanks
ROO

I need help as I am lost at the beginning when the end makes perfect sense.
When first set up with a LOC of 75% (House value x 75%) – Mtg = LOC. If my LOC is $80,000 do I take all $80,000 and immediately invest it? Then as I pay my mtg and say the principle paying down is $275/month it is this amount that is transferred to the LOC and then I pull it out for investing?

So a question comes to mind is if my LOC is $80,000 then I will have over-extended my LOC and so I am S out of luck? Do I tell the broker that he is to increase my LOC by $275 every month above the $80,000?

Should I start my initial investing with $75,000 of the LOC and then continue as per normal and have my broker increase my LOC accordingly?

Huge thanks whoever can help.
CLK

Maybe it’s a very short list……..

DAvid

One thing about the SM that doesn’t seem to get mentioned often enough is that you can reduce your interest rate risk by holding your mortgage portion at a fixed rate, and obviously the loan portion is linked to the prime rate.

I wonder if you own a home? Financially, you’re probably better renting, banking the difference in rent vs. mortgage and investing in GICs. – In everything, risk has always been linked to reward. For those comfortable with the SM – and when it works, their reward is a mortgage that is paid off sooner.

http://www.berkshirehathaway.com/letters/2008ltr.pdf

All purely speculation, however I’m taking the current low interest rate environment to focus on reducing debt, not take on more.

I agree that leveraged investing always has risks and the time horizon should be long term. The question in these particular times is whether those risks are heightened and would you be better off deferring the SM until things settle down. I certainly acknowledge that there are also increased potential for capital gains starting now.

Paul, there’s only so much one can pay off before you have to save/invest again ;)

DAvid