Comments on: DIY Smith Manoeuvre, Part 3 http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/ Helping you invest and prosper Sat, 11 Feb 2012 19:27:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Todd http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-93450 Todd Tue, 18 Dec 2007 20:57:44 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-93450 I have a good impression of IB. Yes the UI is complicated, but the web interface is dumbed down a bit from the custom client. The only things I don't like are: 1) they don't have RRSP. and 2) they enforce the pattern day trader rule that US brokerages enforce - but thats probably a good thing ;) I have a good impression of IB. Yes the UI is complicated, but the web interface is dumbed down a bit from the custom client.

The only things I don’t like are: 1) they don’t have RRSP. and 2) they enforce the pattern day trader rule that US brokerages enforce – but thats probably a good thing ;)

]]> By: Financial Jungle http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-93409 Financial Jungle Tue, 18 Dec 2007 18:07:24 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-93409 What I'm hearing is that IB sometimes misses a few dividend deposits. I haven't experienced that myself, or at least I haven't examined closely enough. That reminds me to reconcile the statements soon. Everyone complains about the UI being too comlicated, but I think it's great. It's not that different from other brokerages' interface. Then again, I'm only a simple investor. I don't trade Forex or options. What I’m hearing is that IB sometimes misses a few dividend deposits. I haven’t experienced that myself, or at least I haven’t examined closely enough. That reminds me to reconcile the statements soon.

Everyone complains about the UI being too comlicated, but I think it’s great. It’s not that different from other brokerages’ interface. Then again, I’m only a simple investor. I don’t trade Forex or options.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-93405 Canadian Capitalist Tue, 18 Dec 2007 17:25:06 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-93405 FJ: I just checked with TDW and IB's margin interest is significantly lower. TDW's margin interest is 6% to 7% for CDN and 7.75% to 8.25% for USD balances. FJ: I just checked with TDW and IB’s margin interest is significantly lower. TDW’s margin interest is 6% to 7% for CDN and 7.75% to 8.25% for USD balances.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-93404 Canadian Capitalist Tue, 18 Dec 2007 17:22:22 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-93404 FJ: That's interesting. Thanks. Do you personally have an account with IB? If you do, are you happy? I'm a bit hesitant to try out new brokers after my experience with Questrade. FJ: That’s interesting. Thanks. Do you personally have an account with IB? If you do, are you happy? I’m a bit hesitant to try out new brokers after my experience with Questrade.

]]> By: Financial Jungle http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-93403 Financial Jungle Tue, 18 Dec 2007 17:10:27 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-93403 >>"Correct me if I am wrong, but margin loans are far more expensive than secured loans. " On the contrary, margin loans are cheaper than secured loans. Canadian Margin Loan: 5.75% Canadian Secured Loan: 6.00% (prime) US Margin Loan: 5.74% http://www.interactivebrokers.com/en/accounts/fees/interest.php?ib_entity=ca#debit --> go to tab (Interests charged) >>”Correct me if I am wrong, but margin loans are far more expensive than secured loans. ”

On the contrary, margin loans are cheaper than secured loans.

Canadian Margin Loan: 5.75%
Canadian Secured Loan: 6.00% (prime)
US Margin Loan: 5.74%

http://www.interactivebrokers.com/en/accounts/fees/interest.php?ib_entity=ca#debit –> go to tab (Interests charged)

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-92977 Canadian Capitalist Mon, 17 Dec 2007 16:29:40 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-92977 Yes, the interest payments should be deductible for borrowing against home equity and buying common shares, even if they don't pay a dividend. Yes, the interest payments should be deductible for borrowing against home equity and buying common shares, even if they don’t pay a dividend.

]]> By: venter http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-92935 venter Mon, 17 Dec 2007 15:18:13 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-92935 What if you have already paid off the mortgage. I would think borrowing a portion of the capital back and investing it in Canadian dividend paying stocks (taking advantage of the taxation benefits) and using div's to pay down the loan would work. The interest payments should be deductible under these circumstances. What if you have already paid off the mortgage. I would think borrowing a portion of the capital back and investing it in Canadian dividend paying stocks (taking advantage of the taxation benefits) and using div’s to pay down the loan would work. The interest payments should be deductible under these circumstances.

]]> By: DIY Smith Manoeuvre, Part 4 http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-92818 DIY Smith Manoeuvre, Part 4 Mon, 17 Dec 2007 03:23:01 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-92818 [...] on implementing a do-it-yourself Smith Manoeuvre. You may also want to check out Part 1, Part 2 and Part 3 of the [...] [...] on implementing a do-it-yourself Smith Manoeuvre. You may also want to check out Part 1, Part 2 and Part 3 of the [...]

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-92816 Canadian Capitalist Mon, 17 Dec 2007 03:18:06 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-92816 Thicken: I've made the point to check with an accountant in the introductory post but I agree that you can't stress this point enough. FJ: Correct me if I am wrong, but margin loans are far more expensive than secured loans. The whole point of the SM is to earn more in equities than the interest cost. By paying more interest costs, the odds of a good outcome will be reduced. Thicken: I’ve made the point to check with an accountant in the introductory post but I agree that you can’t stress this point enough.

FJ: Correct me if I am wrong, but margin loans are far more expensive than secured loans. The whole point of the SM is to earn more in equities than the interest cost. By paying more interest costs, the odds of a good outcome will be reduced.

]]> By: FinancialJungle.com http://www.canadiancapitalist.com/diy-smith-manoeuvre-part-3/#comment-92425 FinancialJungle.com Fri, 14 Dec 2007 22:31:20 +0000 http://www.canadiancapitalist.com/2007/12/12/diy-smith-manoeuvre-part-3#comment-92425 >>"currency hedging isn’t worth the cost " Currency hedging can be free, or at least it can be done relatively easily if you practice the SM and don't mind going on margin. Say you have $100k available in HELOC to invest and you want $40k allocated to US ETF. Then borrow $60k from HELOC to buy your Canadian and International holdings, but borrow $40k from Interactive Brokers US margin to buy US ETFs. Now you're hedged at no extra cost to you. This technique was suggested by Pitzel from the CB forum. The remaining $40k in HELOC acts as a cushion against margin calls. You can also pick the middle of the road; hedge only $20k. >>”currency hedging isn’t worth the cost ”

Currency hedging can be free, or at least it can be done relatively easily if you practice the SM and don’t mind going on margin.

Say you have $100k available in HELOC to invest and you want $40k allocated to US ETF. Then borrow $60k from HELOC to buy your Canadian and International holdings, but borrow $40k from Interactive Brokers US margin to buy US ETFs. Now you’re hedged at no extra cost to you. This technique was suggested by Pitzel from the CB forum.

The remaining $40k in HELOC acts as a cushion against margin calls.

You can also pick the middle of the road; hedge only $20k.

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