Comments on Triaging My Way To Financial Success: Leveraging Dividends:

TD: I keep my leveraging activities strictly to my...

2010-01-12T06:10:13.968-05:00

TD: I keep my leveraging activities strictly to my CDN dividend portfolio (DivG). The interest is tax deductible in a non-registered account so it makes no sense to use this strategy in my RSP accounts. As long as I use my LOC for investing purposes then the interest can be claimed without any concerns.

Brad, do you keep your leveraged investments in a ...

2010-01-11T21:41:36.506-05:00

Brad, do you keep your leveraged investments in a seperate account? Is this necessary for income tax purposes or can all the investments be held in the same account?

THX

Does anyone have any opinion as to how to borrow t...

2009-11-14T18:21:33.012-05:00

Does anyone have any opinion as to how to borrow the money? Are there any pros/cons using a line of credit over margin if the rates are the same? By pros/cons I mean other than a margin call if the value of the stocks drop below the marginable amount.
Cliff

Great post. I use similar tactics while investing ...

2009-02-09T23:22:00.000-05:00

Great post. I use similar tactics while investing in a mix of muni-bonds, preferreds, and dividend stocks. It is all about the cash flow...

Thanks Scott. I think debt in the form of leverage...

2009-02-09T20:19:00.000-05:00

Thanks Scott. I think debt in the form of leverage or any other type needs to be addressed from a cashflow perspective in order for an investor/consumer to adequately tackle one of the most important aspects of buying assets: Risk. As long as I'm on track with my plan than movements in equity markets shouldn't matter much because I'm diversified against risk in a number of positions. Not only that but I'm demonstrating to my lender that I'm able to adequately handle a conservative amount of leverage and have the opportunity to reduce my cost of capital by pressuring them into more favourable rates based on my good credit management.

Mark - I always think it's fascinating when you discuss borrowing to invest in equity. Whether its a house or a group of stocks its the same principle. I see a house as one big giant investment in a bond (appreciating on average at 4%) vs. a portfolio of stocks diversified across many sectors and businesses. I have no problem borrowing the same value to purchase stocks as long as I have the cashflow to manage that debt. Essentially that's the same as purchasing a home - your cashflow determines the extent to which you can borrow funds.

Good post Brad. I find it interesting that levera...

2009-02-09T12:33:00.000-05:00

Good post Brad. I find it interesting that leveraging equities tends to have such a negative connotation to it.

In the recent housing boom many home buyers had no problems putting 0-10% down on their purchases but the minute leveraging equities is discussed it is dismissed as being too risky. I suppose an understanding is necessary between risk and recklessness.

The psychology is fascinating. Leads me to wonder the cause(s) of this phenomenon. Is it the socialization we have a society that housing 'always goes up' and therefore it is a safe investment? Is it felt that because housing is a tangible investment we feel like we are in more control of the situation as opposed to buying shares of a company?

It's strange to me that there is this discrepancy between views on housing vs equity investment, especially given the stats on long term appreciation for the two.

Cheers,
Mark

I really like the method in which you are using le...

2009-02-09T08:39:00.000-05:00

I really like the method in which you are using leverage and treating it as a time value of money question that must be serviced from portfolio cash-flow. I would agree that this is the most prudent approach and should be used to dictate the upper limits on the amount of leverage an investor should use reflecting the current yield of the portfolio and the cost of capital over a reasonable prepayment period (say 5 years maximum).