Quote:
Originally posted by fille
I was reading about shares that provide dividends and a lot of "experts" out there advise to go that route. but then i read a post on redflagdeals stating that mutual funds that did not provide dividends most always beat out those dividend ones.
also, i don't see really how this is truly a manoeuvre.
Downlow, can't you just borrow money from a bank or switch a portion of your mortgage into a credit line mortgage and just invest it? I mean, it doesn't have to be from your mortgage does it? ANY investment is tax deductible right? So go out and take a 50k loan and get it tax deducted.
or am i totally incorrect?
|
No, you are correct re the source of the money.
But! if you take out a secured loan with collateral like real estate, you generally get a lower interest rate. That is about the only way you are going to come out ahead with the SmithMan because the spread between interest paid on your loan and money earned on your investments is small.
The people who gain the biggest advantage to this method are ones who already have a large investment portfolio outside of their RRSPs, plus a mortgage.
For someone just starting out, ie having only 25% equity, and 0 investments, it doesn't make as much sense.
The thing about dividends being good for the SmithMan is that they provide very tax-efficient income that can be used to pay down your mortgage or pay the interest on the investment loan. You don't want to have to sell your investments to pay things down, because you will pay capital gains, which is more expensive for all but the highest tax bracket I believe.
PS More discussion at:
http://www.canadiancapitalist.com/20...noeuvre-debate