Using my margin account

Over the years I have been able to pay back most of my mortgage loan.  Presently I have a condo on the South shore of Montreal.  I am both content and frustrated by this loan situation.  My frustration stems from all the sunk into my condo which seems to increase in value at the same slow rate of inflation.

To tone down my frustration, I have been using a margin account for my taxable stock holdings.  Basically, a margin account allows me to use stocks as guarantee for additional stock purchases with funds I borrow from the broker.  My broker charges me interest on this borrowed money, but since this expense is incurred to generate taxable revenue, the government allows me to deduct this interest.

My strategy is to borrow an amount equal to the value of my condo less the mortgage loan balance.  This means about $140,000.  When I sell my condo, I will simply pay off both the mortgage loan balance and the margin balance with my broker.

I deal with Interactive Broker.  This online broker offers its margin account at an interest rate of 2.72% for Canadian dollar margin and at 3.41% for US dollar margin.  These rates are much cheaper than the 3.95% interest rate my bank charges me for my mortgage secured line of credit.

In the end, I am in no hurry to pay off my fixed rate mortgage loan.


June is a big month for dividend and interest revenue in my portfolio.  This year, my June revenue is $7,745.  To reinvest this amount, I checked my asset allocation and stock allocation to identify which sectors my stockholdings are below my allocation targets.  At this time, the following sectors are below target; Consumer staples, energy, technology and finance.  Therefore, I added to my holdings the following stocks:

CCL Industries  (CCL.B-T)               Consumer staples

Brookfield Energy Partners (BEP -N)        Energy – this is the American version of BEP.UN in Toronto

Helmerich & Payne (HP-N)          Energy

Oracle (ORCL-N)               Oracle

AFLAC (AFL-N)                  Finance

Until next month,

The importance of discipline in saving for the long-term

Discipline is of primary importance to achieve your goal of long-term savings.  By long-term I mean 50, 60 or even 70 years.  I started investing for the long term 28 years ago at 26 years of age.  I will end my accumulation period in a couple of years and then move on to living off the income from the accumulated capital for the rest of my life.  In my case, while I plan to live off the income from the capital, I plan to leave the capital itself with charities and family after my expiration date.

To me, discipline in long-term savings means:

Regularly depositing a pre-established amount in a savings account, that is once a month or on each payday.  As a result, you adjust your way of life without thinking of the amount of spending you deprive yourselves.

Follow the rules of your savings plan.  If your plan includes buying units of a mutual fund every three months, make it so whether the stock market is up or down.  After all, over the next decades, you can reasonably expect recessions to happen about every 10 years.  So down markets… there will many during your long-term project.

Live below your means.  In our life and time, it’s not very appealing to live less of a life than you can afford.  So, although the amount of money you set aside may appear small as to ask yourself the question why bother?  In the long-term the results will likely me immense.  So it’s important to respect your plan and live below your means.

In May, the value of stocks in the consumer discretionary and REITs has exceeded my model target.  Therefore, I’m selling some shares of Magna International (MGA-T) and Northview Properties (NVU.UN-T).

With these funds I will purchase more shares of stocks in sectors that are below my stock allocation target, namely health and consumer base.  These will likely be Johnson  & Johnson (JNJ-N) and Pepsi (PEP-N).

Until next month,