Comments on: Smith Manoeuvre Portfolio – Dec 2008 http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm Building Wealth through Saving and Investing Fri, 19 Mar 2010 19:36:23 -0400 http://wordpress.org/?v=abc hourly 1 By: FrugalTrader http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65991 FrugalTrader Fri, 02 Jan 2009 20:22:43 +0000 http://www.milliondollarjourney.com/?p=747#comment-65991 mcf, Bullseye is correct. My dividend yield is based on my purchase price and not current market conditions. Dividends are paid as $/share which doesn't change based on market price. Not unless, of course, the company cuts, reduces or increases the dividend. mcf, Bullseye is correct. My dividend yield is based on my purchase price and not current market conditions. Dividends are paid as $/share which doesn’t change based on market price. Not unless, of course, the company cuts, reduces or increases the dividend.

]]> By: Bullseye http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65971 Bullseye Fri, 02 Jan 2009 15:56:52 +0000 http://www.milliondollarjourney.com/?p=747#comment-65971 'Because the dividend yield is a percentage of current market value, while the interest payments are based on loan principal (ie purchase price)' No, dividend yield is a percentage of your cost at the time you bought it, not the current value. When you buy, you 'lock in' that yield, and that yield only changes when the dividend paid is increased or decreased by the held company. ‘Because the dividend yield is a percentage of current market value, while the interest payments are based on loan principal (ie purchase price)’

No, dividend yield is a percentage of your cost at the time you bought it, not the current value. When you buy, you ‘lock in’ that yield, and that yield only changes when the dividend paid is increased or decreased by the held company.

]]> By: mcf http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65928 mcf Fri, 02 Jan 2009 03:40:55 +0000 http://www.milliondollarjourney.com/?p=747#comment-65928 Your 4.03% dividend yield might not actually be enough to cover your 3.5% interest rate. Why, you may ask? Because the dividend yield is a percentage of current market value, while the interest payments are based on loan principal (ie purchase price). So if, like many of us, your portfolio value is below the original borrowing cost, dividend yield needs to be quite a bit higher than the interest rate. Your 4.03% dividend yield might not actually be enough to cover your 3.5% interest rate. Why, you may ask? Because the dividend yield is a percentage of current market value, while the interest payments are based on loan principal (ie purchase price). So if, like many of us, your portfolio value is below the original borrowing cost, dividend yield needs to be quite a bit higher than the interest rate.

]]> By: Mark http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65898 Mark Thu, 01 Jan 2009 21:10:19 +0000 http://www.milliondollarjourney.com/?p=747#comment-65898 Reply to DGI and others: Given the year that was for the markets and the uncertain times ahead, is the Smith Manoeuvre really a good idea? If you don't need a home equity line of credit to buy stocks or other investments, then should you really do it? I figure, if you can save $2,000 - $5,000/year to buy some units of dividend-paying stocks, WHILE paying down the mortgage or debt, isn't that a better strategy than leveraging "the house"? Happy New Year! Reply to DGI and others:

Given the year that was for the markets and the uncertain times ahead, is the Smith Manoeuvre really a good idea?

If you don’t need a home equity line of credit to buy stocks or other investments, then should you really do it?

I figure, if you can save $2,000 – $5,000/year to buy some units of dividend-paying stocks, WHILE paying down the mortgage or debt, isn’t that a better strategy than leveraging “the house”?

Happy New Year!

]]> By: Dividend Growth Investor http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65826 Dividend Growth Investor Wed, 31 Dec 2008 21:44:17 +0000 http://www.milliondollarjourney.com/?p=747#comment-65826 It has definitely been a tough year for investors. Add in the leverage factor and the pain is even more pronounced. I learned one thing early in my stock market career - never to bet the house on the market or in other words use leverage to invest in the markets without clear risk management strategy. It has definitely been a tough year for investors. Add in the leverage factor and the pain is even more pronounced. I learned one thing early in my stock market career – never to bet the house on the market or in other words use leverage to invest in the markets without clear risk management strategy.

]]> By: DAvid http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65806 DAvid Wed, 31 Dec 2008 15:19:54 +0000 http://www.milliondollarjourney.com/?p=747#comment-65806 Julie, I transfer excess cash in my brokerage account to a High Interest Savings account, as I'm not expecting to need it instantly. These accounts seem to be paying better than GIC's these days, so might be better than many money market instruments. DAvid Julie,
I transfer excess cash in my brokerage account to a High Interest Savings account, as I’m not expecting to need it instantly. These accounts seem to be paying better than GIC’s these days, so might be better than many money market instruments.

DAvid

]]> By: FrugalTrader http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65794 FrugalTrader Wed, 31 Dec 2008 13:10:52 +0000 http://www.milliondollarjourney.com/?p=747#comment-65794 Julie, no such thing as dumb questions. There is a short term currency risk with holding stock in USD. However, studies have shown that over the long term, currency risk is significantly reduced. If you are looking to index your American stocks, look at some of the ishares ETF's which are currency hedged. (ie. XSP) With regards to cash in the account, transferring excess cash to a high interest rate savings account is a good idea. In fact, E Trade offers a high interest account that can be transferred to your discount brokerage instantly. I have transferred money to a money market fund, but I believe the fees are individual to the brokerage. I have never been charged with buying/selling a money market fund, besides the MER of course. Finance_Addict, I feel the same way. I have a lot of cash that could be deployed right now and the yields are very tempting. However, the thoughts of a dividend cut is enough for me to hold out a little longer. Out of all the banks, it looks like BMO may be at the highest risk with close to a 9% yield. Julie, no such thing as dumb questions. There is a short term currency risk with holding stock in USD. However, studies have shown that over the long term, currency risk is significantly reduced. If you are looking to index your American stocks, look at some of the ishares ETF’s which are currency hedged. (ie. XSP)

With regards to cash in the account, transferring excess cash to a high interest rate savings account is a good idea. In fact, E Trade offers a high interest account that can be transferred to your discount brokerage instantly. I have transferred money to a money market fund, but I believe the fees are individual to the brokerage. I have never been charged with buying/selling a money market fund, besides the MER of course.

Finance_Addict, I feel the same way. I have a lot of cash that could be deployed right now and the yields are very tempting. However, the thoughts of a dividend cut is enough for me to hold out a little longer. Out of all the banks, it looks like BMO may be at the highest risk with close to a 9% yield.

]]> By: Finance_Addict http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65773 Finance_Addict Wed, 31 Dec 2008 04:03:24 +0000 http://www.milliondollarjourney.com/?p=747#comment-65773 FT: Had Teck maintained the dividend I would have held. However you did the right thing to get out as it no longer makes sense to hold in a leveraged account. I too am very eager to buy TD and MFC. I am hesitant because I don't want to see dividend cuts. I know it seems unlikely however times are such that anything is possible. I can't find anyone who thinks dividend cuts are a real risk which makes me even more nervous. I have to think that issuing so much new equity at the lower prices only add further strain on maintaining the dividend going forward? With that said, limping in or averaging down I think makes good sense. It sure does help to have a wide spread between our borrowing costs and dividend yields. I am holding plenty of BCE but can afford to wait as my borrowing costs are easily covered...for now. FT: Had Teck maintained the dividend I would have held. However you did the right thing to get out as it no longer makes sense to hold in a leveraged account. I too am very eager to buy TD and MFC. I am hesitant because I don’t want to see dividend cuts. I know it seems unlikely however times are such that anything is possible. I can’t find anyone who thinks dividend cuts are a real risk which makes me even more nervous. I have to think that issuing so much new equity at the lower prices only add further strain on maintaining the dividend going forward? With that said, limping in or averaging down I think makes good sense. It sure does help to have a wide spread between our borrowing costs and dividend yields. I am holding plenty of BCE but can afford to wait as my borrowing costs are easily covered…for now.

]]> By: Julie http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65753 Julie Tue, 30 Dec 2008 20:39:35 +0000 http://www.milliondollarjourney.com/?p=747#comment-65753 As someone who has just opened a brokerage account I found it interesting to read through your holdings. Can I ask two dumb questions? (sorry, I'm really new at this).. re: your int'l holdings (e.g. FTSE) how do you hedge the currency risk? I'm interested in buying a few American stocks but must I necessarily assume the risk of currency as well as determining the risks of a particular stock? Also, how do you determine what to do with short-term cash in your brokerage acct? My brokerage does not offer any kind of cash-optimizer account.. so I figure my choices are to transfer back to a high-interest savings account or buy a money market fund, though I'm not clear on what fees there are for redeeming such funds. Is it worthwhile to put money short-term into such a fund? Any insights you or readers have would be greatly appreciated :) Many thanks.. As someone who has just opened a brokerage account I found it interesting to read through your holdings.

Can I ask two dumb questions? (sorry, I’m really new at this).. re: your int’l holdings (e.g. FTSE) how do you hedge the currency risk? I’m interested in buying a few American stocks but must I necessarily assume the risk of currency as well as determining the risks of a particular stock?

Also, how do you determine what to do with short-term cash in your brokerage acct? My brokerage does not offer any kind of cash-optimizer account.. so I figure my choices are to transfer back to a high-interest savings account or buy a money market fund, though I’m not clear on what fees there are for redeeming such funds. Is it worthwhile to put money short-term into such a fund?

Any insights you or readers have would be greatly appreciated :) Many thanks..

]]> By: FrugalTrader http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65746 FrugalTrader Tue, 30 Dec 2008 19:14:48 +0000 http://www.milliondollarjourney.com/?p=747#comment-65746 Ian, the portfolio value is down quite a bit, but the dividends have held up. With regards to the wifey, we both share the same financial goals. As long as I explain the strategy and what the risks are, she will more or less trust my judgement as I would hers on subjects that she's passionate about. Ian, the portfolio value is down quite a bit, but the dividends have held up. With regards to the wifey, we both share the same financial goals. As long as I explain the strategy and what the risks are, she will more or less trust my judgement as I would hers on subjects that she’s passionate about.

]]> By: Ian M http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65745 Ian M Tue, 30 Dec 2008 19:05:54 +0000 http://www.milliondollarjourney.com/?p=747#comment-65745 I was very interested to see how this strategy would hold up during the downturn; and it seems like your dividend focused portfolio weathered the storms quite well. This entirely adds to the argument for this strategy. Question though: How the heck did you convince the wifey? I was very interested to see how this strategy would hold up during the downturn; and it seems like your dividend focused portfolio weathered the storms quite well. This entirely adds to the argument for this strategy. Question though: How the heck did you convince the wifey?

]]> By: DAvid http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65734 DAvid Tue, 30 Dec 2008 14:59:02 +0000 http://www.milliondollarjourney.com/?p=747#comment-65734 Solidified a capital loss this month, and will be looking at some of those holdings again in 31 days. Hopefully the recovery is not TOO soon! DAvid Solidified a capital loss this month, and will be looking at some of those holdings again in 31 days. Hopefully the recovery is not TOO soon!

DAvid

]]> By: Sonny http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65733 Sonny Tue, 30 Dec 2008 14:58:32 +0000 http://www.milliondollarjourney.com/?p=747#comment-65733 Reverend, you can't time the market. It sure would be great to have gotten in at $30, but in the long run, I think you'll still find that to be an attractive price. FT, as you mentioned, with interest rates so low + tax breaks, now is the best time to start leveraging to buy good stable dividend paying stocks. At least that's what I keep telling myself. I still haven't jumped in and started the SM. Reverend, you can’t time the market. It sure would be great to have gotten in at $30, but in the long run, I think you’ll still find that to be an attractive price.

FT, as you mentioned, with interest rates so low + tax breaks, now is the best time to start leveraging to buy good stable dividend paying stocks. At least that’s what I keep telling myself. I still haven’t jumped in and started the SM.

]]> By: The Reverend http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65732 The Reverend Tue, 30 Dec 2008 13:27:38 +0000 http://www.milliondollarjourney.com/?p=747#comment-65732 You're not the only one the bought too much, too soon. I jumped into BNS when it got down to the $39 range, but purchased pretty much my entire position in one shot (it probably won't go lower than this anyway, right?), to subsequently see it drop another $10 and not have any more cash sitting on the sidelines. We live and learn. You’re not the only one the bought too much, too soon. I jumped into BNS when it got down to the $39 range, but purchased pretty much my entire position in one shot (it probably won’t go lower than this anyway, right?), to subsequently see it drop another $10 and not have any more cash sitting on the sidelines.

We live and learn.

]]> By: The Financial Blogger http://www.milliondollarjourney.com/smith-manoeuvre-portfolio-dec-2008.htm/comment-page-1#comment-65727 The Financial Blogger Tue, 30 Dec 2008 11:58:26 +0000 http://www.milliondollarjourney.com/?p=747#comment-65727 The investing game has been rough this year. Even rougher for people who leverage ;-) I'm posting my SM update early in January... will not look pretty ! However, I am actually looking forward buying more bank stocks as their dividend yield is awfully high! That will surely pay off my interest and make the strategy "free of charges". Cheers and good luck in 2009! FB. The investing game has been rough this year. Even rougher for people who leverage ;-)
I’m posting my SM update early in January… will not look pretty !

However, I am actually looking forward buying more bank stocks as their dividend yield is awfully high! That will surely pay off my interest and make the strategy “free of charges”.

Cheers and good luck in 2009!

FB.

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