[AlwaysLearning]

Hello all!

First I will give a little bit of background:
I work in the medical industry which makes my job an essential service which is extremely busy and secure during this pandemic. My spouse is in airspace so her career could be at a higher risk during this time.
I am ~40 years old with two young kids (5 and 7) which we are watching while both working from home...

Feeling financially fortunate at this time has led us to doing regular donations to our local food bank to help others who are not so fortunate. I encourage others to consider helping those less fortunate through the pandemic as well.

We currently have all RRSP's and TFSA's maxed out and have done some unregistered investing as well.
I would like to start using my previously untapped HELOC to start doing some leveraged investing. (100-150K). As I am new to leveraged investing I am interested in any advise/thoughts on this.
As we both currently have unregistered accounts with our current discount broker should I open a new unregistered account to make the taxes etc. easier? Any issues with doing this at my current discount brokerage (TD). As the HELOC is from a jointly owned home who should be the owner of the unregistered account (me or my spouse)? (My income is ~115K, and my spouses is ~90K).

My thought is to do 3 lump sums of ~ 50K each starting now then consider adding every month. My initial thought is investing in one ETF that is 100% equities (VEQT).

I welcome any feedback and thoughts on this plan and will try to answer any questions. (But understand at this time my job/kids have me very busy so responses may be delayed)

Thanks,

AlwaysLearning

 

[Pluto]

I'm an advocate for leverage, so by all means, do it. I don't advocate leverage in normal or euphoric markets as that is a recipe for a wipe out. Commencing in a bear market is safest. I have no idea what VEQT is and know little about etf's so I can't comment there. Just make it something that reliably goes up in the long term.

Leverage in the right security at the right time can really add rocket fuel to ones portfolio. Myself I don't stay leveraged once markets normalize. I sell enough stock to pay off the loan.

 

[andrewf]

Similar situation here. I think it is still too early in this bear market to be adding much leverage. I will wait until after the bottom is in and we are cracking above 200 day to commit. I'm okay with missing the bottom--I continue to DCA with my pension contributions so I am participating in part in the up trend.

 

[AlwaysLearning]

VEQT is Vanguards all Equity ETF

Any advise on the logistics of using a HELOC from a jointly owned home? Also is there anything I should be aware of for the leveraged account? Can I use an existing unregistered account or are there accounting reasons why it should be separate? Also are there any rules over it being in my name or my wife's? We share all finances so it is only due to taxation rules that one may be better than the other.

 

[Pluto]

Well you could ask your broker for a margin account. Otherwise a HELOC should be OK. I suppose it depends on the best interest rate. Too, you want to buy securities that are eligible for carrying charges tax deduction.

 

[andrewf]

You can only use very limited leverage in a margin account with any degree of safety. And Interactive Brokers is the only brokerage I know of with reasonable rates for margin loans.

 

[Eclectic12]

Any advise on the logistics of using a HELOC from a jointly owned home? Also is there anything I should be aware of for the leveraged account? Can I use an existing unregistered account or are there accounting reasons why it should be separate?

Keep the HELOC charges for the portfolio only ... mixing the use does strange things to how much of the interest is deductible.

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I’ve been writing about how to start the Smith Manoeuvre and transform your mortgage in a tax deductible loan since 2007. In fact, it was one of the first articles that I ever wrote on MDJ! My Smith Manoeuvre portfolio is still increasing its dividends, and with interest rates going up so...

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Make sure you are familiar with the rules for what is and what is not allowed for the interest deduction. Have a plan for return of capital (RoC) that reduces what can be deducted as it is paid.

If I was starting from scratch again, I'd open a separate NR brokerage account so that the brokerage would be documenting what's in the leveraged portfolio versus what I already owned instead of me.

Also are there any rules over it being in my name or my wife's? We share all finances so it is only due to taxation rules that one may be better than the other.

The attribution rules say that who provided the funds for the investment purchase is who reports the income, deducts the interest expense and reports the capital gain (or loss) from selling.

If you both take out loans for half the amount then the income/interest deduction/capital gains get split 50/50. If only you take out the loan then only you do the reporting.

The Tax Attribution Rules: A Response To Income Splitting—A Canadian Tax Lawyer's Guide - Capital Gains Tax - Canada

The Canadian system taxes individuals progressively. High-income earners are subject to a higher marginal tax rate; low-income earners incur a lower marginal tax rate.

www.mondaq.com

Should CRA question whatever is being reported, it's up to you to be able to trace the funds to the investments to show what is being reported is accurate.


Cheers

 

[AlwaysLearning]

Thank you Eclectic12 for all the information! I am hoping to dedicate some time to setting everything up this week and be ready for my lump sum purchase next week.

With daily fluctuations so large I am not sure I will pull the trigger yet though... That said I want to be ready and need to think long term big picture.

This time will be one to look back on for years to come for many reasons. I want to do what I can to make the most of this situation.

Beyond leverage I have been increasing all regular contributions. Assuming you do not face loss of employment it should be easy to increase all regular investment amounts with the forced decrease in spending. No child care costs, No vacations, No eating out, Low entertainment costs (I did find a local brewery that delivers to my home for free!), No/Low gas costs.

AlwaysLearning

 

[hfp75]

I just made a margin acct and moved my cash acct to the margin acct.....

I have never used margin before, but from what read you get to leverage different % of different types of securities. Seems simple enough.

hope they move my ACB over to the new acct.....

 

[hfp75]

Interested to hear what % of your margin you guys and gals are using ?

Have you just bought in or have you been leveraged for a while ?

 

[james4beach]

I don't use any margin currently but if I did want to go that route, I think I'd probably use my unsecured LOC. The reasoning there is that regular margin accounts can get margin calls for a variety reasons. The broker doesn't actually need a good reason. They can decide that conditions are too dangerous and they are NOT lending to you any more. Or they can change the margin requirements on your existing positions... this can really take someone by surprise.

I feel it's less likely my unsecured LOC would get called in, so I think I would borrow off that for ongoing leverage.

Back in 2013, a few of us on this forum got a sudden margin call from Interactive Brokers. That really taught me a lesson... you can't really trust margin brokers. The change was due to something going on at the SEC, but their change was also in contradiction to IIROC margin recommendation at the time. IIROC said this security could be margined, but IB decided, "no it can't"
Margin Call At IB

At the end of the day, they changed the loan value on a security I held from 70% down to 0% with just a couple days notice even though it should have been marginable according to IIROC.

I do NOT intend to go through that again, so I don't use broker margin loans except for temporary actions where I need more buying power, like some transfers, gambits, or trading before T+2 settlement.

You can only use very limited leverage in a margin account with any degree of safety. And Interactive Brokers is the only brokerage I know of with reasonable rates for margin loans.

And one reason I think IB is generous with their margin rate is that they have very tight risk controls. IB is notorious for immediate and brutal liquidation of accounts in violation of margin.

Be careful with margin. Lots of ways it can go wrong.

 

[hfp75]

Good points J4B, I guess I need to be prepared to use my HELOC to support the Margin Acct if there is a call...

 

[SIROPGUD]

Hello all!

First I will give a little bit of background:
I work in the medical industry which makes my job an essential service which is extremely busy and secure during this pandemic. My spouse is in airspace so her career could be at a higher risk during this time.
I am ~40 years old with two young kids (5 and 7) which we are watching while both working from home...

Feeling financially fortunate at this time has led us to doing regular donations to our local food bank to help others who are not so fortunate. I encourage others to consider helping those less fortunate through the pandemic as well.

We currently have all RRSP's and TFSA's maxed out and have done some unregistered investing as well.
I would like to start using my previously untapped HELOC to start doing some leveraged investing. (100-150K). As I am new to leveraged investing I am interested in any advise/thoughts on this.
As we both currently have unregistered accounts with our current discount broker should I open a new unregistered account to make the taxes etc. easier? Any issues with doing this at my current discount brokerage (TD). As the HELOC is from a jointly owned home who should be the owner of the unregistered account (me or my spouse)? (My income is ~115K, and my spouses is ~90K).

My thought is to do 3 lump sums of ~ 50K each starting now then consider adding every month. My initial thought is investing in one ETF that is 100% equities (VEQT).

I welcome any feedback and thoughts on this plan and will try to answer any questions. (But understand at this time my job/kids have me very busy so responses may be delayed)

Thanks,

AlwaysLearning

Hello! I think it would be a good idea to find a broker to help you open a new account and necessarily a good lawyer to give you advice on the levers of tax law. At the same time, I think it would be good to consult you when trading cryptocurrency. But see for yourself if you can afford it. Nowadays it is much easier to pay with cryptocurrency the services of freelancers such as lawyers, brokers, notaries, and so on. I wish you success and all the best! Do not try to do very risky things without consulting yourself.

 

[MrMatt]

I'm just looking at the massive swing we had about 6 months ago back in march/April.
Being over leveraged is pretty risky

 

[Eclectic12]

I should add that I missed that the source of the funds is the HELOC on a jointly owned home. CRA is likely to see this as a 50/50 spit so I'd go with that. With the size of the amount being considered, I'd setup a separate non-registered account to have the broker document what the tax implications are for the borrowed funds. Ideally, it would be with the same broker but likely it's not the end of the world if a separate brokerage has to be used.


Cheers

 

[:) lonewolf]

Hello all!

First I will give a little bit of background:
I work in the medical industry which makes my job an essential service which is extremely busy and secure during this pandemic. My spouse is in airspace so her career could be at a higher risk during this time.
I am ~40 years old with two young kids (5 and 7) which we are watching while both working from home...

Feeling financially fortunate at this time has led us to doing regular donations to our local food bank to help others who are not so fortunate. I encourage others to consider helping those less fortunate through the pandemic as well.

We currently have all RRSP's and TFSA's maxed out and have done some unregistered investing as well.
I would like to start using my previously untapped HELOC to start doing some leveraged investing. (100-150K). As I am new to leveraged investing I am interested in any advise/thoughts on this.
As we both currently have unregistered accounts with our current discount broker should I open a new unregistered account to make the taxes etc. easier? Any issues with doing this at my current discount brokerage (TD). As the HELOC is from a jointly owned home who should be the owner of the unregistered account (me or my spouse)? (My income is ~115K, and my spouses is ~90K).

My thought is to do 3 lump sums of ~ 50K each starting now then consider adding every month. My initial thought is investing in one ETF that is 100% equities (VEQT).

I welcome any feedback and thoughts on this plan and will try to answer any questions. (But understand at this time my job/kids have me very busy so responses may be delayed)

Thanks,

AlwaysLearning

Google "dow award" " leveraged for the long run"

Just use leveraged etfs, forget about using margin

 

[Rusty O'Toole]

I have been doing some leveraged investing and this year, my account is up 33.54% since the end of March a period of a little over 6 months.
All made trading TQQQ a leveraged ETF that represents tech stocks. I laid out the method I used to know when to get in and when to get out in another thread. I could give you the details if you wish, but I hesitate to even mention it because of all the negative responses.
If you are interested let me know.