Wednesday, March 24, 2010

Blog Introduction

The purpose of this blog is to track my progress of putting together a non registered investment portfolio with 150% allocation of eligible dividend paying canadian stocks listed on the TSX.  Thats right the 150% is not a typo. I'm plannig to use 50% margin in this portfolio.

I'm going to justify the use of margin by stating that
1. I am 30 years old.
2. I have a stable job.
3. I am single with no dependents.
4. I have no other debts and the cost of capital (intrest rate) on the margin is low and is tax deductable.
5. This portfolio is going to be a very long term buy an hold. I intend to leave it for my kids and widow(s).
6. 50% leverage will stil leave significant margin in the account. it will be unlikely for me to get a margin call.
7. The holdings in this account are be fairly conservative.
8. I already hold significant non leveraged RRSP portfolio and TSFA.
9. I intend to let the portfolio deleverage itself as it grows older.

and conclude that my risk tolerance supports the use of this much margin.

now that I have justified the margin, I'm going to justify the reasons behind creating this portfolio.

1. I am 30 years old. It is time to start investing more conservatively.
2. I have been maxing out my RRSP and TSFA the first trading day every January.
3. I don't own any eligable dividend paying stocks in my RRSP or TSFA. since they don't belong there.
4. I am currently very poor in this major asset class with less than 1% of my net worth
5. My employment salary puts me in a high tax bracket. the dividend tax credit is going to help me reduce my tax burden and keep more of these earnings.

Portfolio Strategy:

1. I will invest only in eligible dividend producing instruments. no Reits no Income trust and no bonds. those belong in a tax advantaged account, not here.
2. I will not be using drips. The reason being is that the dividends comming in are going to be used to deleverage the portfolio by paying down the margin.
3. Low turnover, stocks will be bought and held forever.
4. I will be allocating about most of my free cash flow into this account. plus any special one time piles of cash that come along. for the next 2 years
5. In 2 years when I turn 32  I plan to redirect my free cash flow to another project I have in mind which i will reveal 2 years from now. so cash flow into this portfolio will stop.
6. Once the cash inflows have stopped this portfolio will be left to deleverage.
7. When the margin is mostly paid off to 5% margin I will turn on the drip. since this broker doesn't offer a synthetic drip, the change left over from the drip will finish off the remaining margin.


  1. Interesting strategy. Since you have a good job situation, why not go with margin, but its not something made for everyone.

  2. You might want to check out a couple of posts (especially the comments) that you may find relevant to your strategy.