Hi all, Another Interest rate hike, another update Here we go: Pre Interest Hike Interest: 6.15% or $1,258/month Net profit: $636/month After Interest Hike Interest: 6.65% or $1,360/month Net profit: $502/month Amount invested: $280,000 ($245,485 is from HELOC) Market value: $330,762 Gains: +$51,034 (18.23%) Avg Monthly dividends: $1,862/month So $502/month... getting lower and lower. And buying growth stocks/funds for the past 6 months or so hasn't helped increase that amount - I did it though because growth is only 6.8% of my portfolio; I want that number higher. But during this time of increasing interest rates, I'll put that on hold for now. It's too bad - I'm on a timer for growth as I'm only 13 years away from retirement and with each passing year, growth stocks/fund will lose their value to me (their total return for me will be lower). oh well, I blame 20 year old MrMikeDD for not investing. If I lose that time then all I can do is teach my kids to do better (which I am). My plan going forward is: Non-reg: Use dividends to pay down the heloc (the TFSA portion) TFSAs: Reinvest into Canadian blue-chips that pay higher yield such as AQN, GWO but most likely I'll start building a position in POW. I'd like to hold off using my TFSA to pay down the loan because - normally you want your TFSA maxed at all times so if I take dividends out, I'll receive more contribution room the following year and I'll want to fill back up. Why use that money if I'm just going to want to add it back later? With that in mind, I'd like to try and keep dividends reinvested in there for as long as possible. By using dividends from my non-reg account, I don't feel compelled to add that back.... well, maybe if interest rates drop back to 3% again What are you thoughts? Thanks all and take care,
Howdy, Mr.Mike. I have Skimmed this Thread, forgive me if I am wrong, but are you in Canada, and are you Investing in a Taxable Account? I am Assuming So, and at a 15% Income Tax Rate on Dividends, isn't your Profit ~$280 less per month? Sorry, I am in the USA and Do Not Know Canada Laws. This Just Jumped out at me. -IndependentCandy14
Hey, no need to be sorry - all questions are welcomed. And yes, I'm in Canada. About 1/2 of my HELOC was used to top up my wife's and my own Tax Free Savings account. The other 1/2 is in a non-registered account (a taxable account). Obviously the TFSA is tax-free, I don't pay taxes but I'm also not able to claim the HELOC interest for the amount used in this account. In the non-reg account, I do need to pay taxes but I'm also allowed to claim the interest accrued from that HELOC. In April 2022 (for the tax year of 2021), I actually made $272 because of the money I got back from the government. But to your point, you are correct that the $502/month is before tax - but at 2.65% and claiming it, I got back $272 in 2021. I'm very interest to see what I get back for the 2022 year when interest rates have been a lot higher and I've paid a lot more in interest. On other forums, people are reporting the same thing - that the claimed interest is a clean wash for the taxes you would have paid. Come April 2023, I'll update you on that (as well as before then too)
Hi all, Another Interest rate hike, another update Here we go: Pre Interest Hike Interest: 6.65% or $1,360/month Net profit: $575/month After Interest Hike Interest: 6.9% or $1,412/month Net profit: $524/month Current Status Amount invested: $280,000 ($245,485 is from HELOC) Market value: $333,813 Gains: +$53,813 (19.2%) Avg Monthly dividends: $1,978/month Plan going forward I want to start a new position in CNQ and PPL. Both are Canadian blue-chips with solid past performance with dividend-growth doubling over the past 10 and 20 years. See this post for chart. That will take me awhile to buildup but after that, I do want FTS as well. Once those 3 new positions are in, I think I'm done (for now) with new holdings; I want to increase my position in TD, RY and Telus. That should take to me the end of the year. Current Portfolio (ending Dec 31, 2022 I believe) Dividend growth The chart below shows my 2022 dividend-growth as 16.28%. I know that seems high so please let me know if how I'm calculating it is incorrect. If that's the case then put this in a calculator, take my avg monthly dividends ($1,978) x 1.1628 and press Equals 10 times. Today: $1,978/month 10 years from today: $8,938/month all while my heloc interest rate is $1,412/month (assuming same interest rate). I know anything can happen but this is still fun to think about Note: Said plan is not binding and I do reserve the right to change my strategy at any time of my choosing ;P
I recently gave a portfolio update above but this is in a video format and there have been a couple changes since then: Changes - sold ZSP/ZQQ and added to Apple/Amazon - sold $10K capital gains of ENB and bought CNQ and CNR
Borrowing money to invest can be a viable strategy for some investors, but it also carries certain risks that should be carefully considered before making any decisions. On the one hand, borrowing money to invest can potentially amplify investment returns, as the returns earned on the invested funds can be used to pay back the borrowed money with interest, resulting in a greater overall return on the investment. This strategy can be particularly effective when interest rates are low and the expected returns on the investment are high. On the other hand, borrowing money to invest also increases the risk of losses, as the investor will have to repay the borrowed funds even if the investment does not perform as well as expected. Additionally, if the borrowed funds are subject to variable interest rates, rising rates could increase the cost of borrowing and reduce the overall return on the investment. Ultimately, the decision to borrow money to invest should be based on an individual's personal financial situation, risk tolerance, and investment goals. It is important to carefully consider the potential risks and rewards of this strategy and to consult with a financial professional before making any investment decisions.
There is a 99.9% chance that slappy is just another bot account. Like FidelGeorge/coyote/ and several more from the past. These are very common and easy to spot.
Thanks! which break down are you talking about? Oh man, my last post was almost exactly 1 year ago. I should provide an update...
What's your side business? That's awesome that you have that extra stream on income. That update was 3 years ago!!! I don't get traffic on this forum so I don't update often. Here is my current status - for those that don't remember, I had only $22,500 of my own money to invest and I borrowed ~$255K from my HELOC and invested everything. Now around 4 years later: I've made $118K net (the remainder if I sold everything and paid down the HELOC) and collect $1,554/month in dividends. I'm currently paying down the HELOC but with the interest rates coming down, I plan to start reinvesting in the new year. I liked Apple and Amazon and I want to build them back up ... but I have sold them. With high interest rates, I sold all positions that had less than 4% YOC and replaced them with higher yielding positions (hence why my dividends/month jumped up). Now with $1,500/month, it wont take long to rebuild my positions in Apple/Amazon/CNR/MRU, etc...
to be fair, it's from a Home Equity Line of Credit - a secured loan, which is why it's that high. You probably couldn't get an unsecured loan (LOC - Line of Credit) for that amount. Second, I invested smaller amounts over 1 year, maybe 1.5 years. It's still a lot but just in case you're thinking I invested $255K on a random Tuesday haha
It was a risky move that worked out well, thanks to careful timing. Managing risk and reward made a big impact on your financial path.
Borrowing money to invest can be extremely risky, or relatively safe. By risk I mean permanent loss of capital, not volatility. If you're paying a high interest rate on callable debt in an investment in the AI tech industry, then we can all agree that is extremely risky. But say you for what ever reason have access to below market interest rates on uncallable debt, and you buy govt bonds with a yield to maturity below the interest rate on the debt, well that's extremely safe and you should take on as much of that debt as humanly possible. Insurance float is a good example of debt you want as much of as possible. I think margin loans are fairly reasonable/safe if kept to a small size, say 10%, keeping the chance of a margin call basically none. Anyway these are just the ramblings of a 19 year old so take this post with a grain of salt.
