Profile image
By Greater Fool (Reporter)
Contributor profile | More stories
Story Views
Now:
Last Hour:
Last 24 Hours:
Total:

Balance

% of readers think this story is Fact. Add your two cents.


Last year, when Bay Street was hobbled, bruised and unloved, a certain pathetic blog suggested you heavy up a bit on maple. Hey, that’s what rebalancing is all about. Set the correct weightings, then corral them back into line when they stray. Thus, a plop in Canadian assets rendered them underweight. The correct move was to sell the portfolio winners, harvest gains, and buy the losers – just the opposite of what your brother-in-law does.

Today you know why. The TSX has swelled more than 18% this year. The index just hit a record high. For the first time it will cross the 17,000 mark, thanks to oils and banks. Despite being led by questionable people, two of whom love turbans, the country’s actually doing okay. No wonder the central bank’s in no rush to drop rates. And this is why we took a little money off the table in the US last year and plunked it down on Canuckistan. Totally counter-intuitive. And smart.

No matter how smart you think you are, it’s impossible to forecast what sectors or assets will crash or soar a year from now. So don’t sweat it. Own them all, but in weightings that make sense. And when those proportions are thrown off track, bring them back. Take the profits and purchase bargains.

By way of contrast, the Dow is ahead 16% and sits 4.5% higher than a year ago. Bay Street has bested that with an 8% year/year advance. Balanced and diversified portfolios which shed 2-3% in 2018 (thanks to you-know-who) are ahead almost double digits in 2019.

But, I hear the steerage section cry, what about a recession? Won’t markets fall because they just hit new highs? Don’t guys like David Rosenberg have a point and shouldn’t we be wallowing in cash?

Nope. Bad advice. A downturn will surely come one of these days and last for a while. Stocks will fall. Bonds will go up. Volatility will increase. Headlines will be dire. It could even happen as 2019 draws to a close. The best defence is a portfolio kinda like your all-weather tires. Sun, rain, snow – who cares? The weather may slow you down, but it won’t send you careening. That’s why you have balance. And this blog.

Now, what would the day be like without a needy reader? So here’s Wendy , living on Vancouver Island and wondering if her husband is nuts, or just hangs with the wrong crowd…

Long time reader (my dad got me hooked), but rare commentor and now I need to make some decisions. (Feel free to blog this if you want). Bought house in spring of 2015 for $285k and managed to snap up a home from a desperate couple and paid what we felt was a great price for a great home. Fast forward 4.5 years. It’s time to do some big fixes and we don’t have the capital to finish. House has potential to be worth significantly more if we do the fixes, a house the same age and condition on street but 1/2 the size sold for $410 this past spring (we have ocean views and sit next to a never to be developed ravine at the end of a street).

The plan was to remortgage for $360k and take the difference and use that to finish all the projects (or $300 and HELOC for $60) but hubby has been talking to coworkers and they have heard that you can take a HELOC out for the full value of the home, and then instead of making the same payments, make only the interest and then invest the difference. Once enough time has passed and enough growth has happened, pay off the mortgage and have a sizeable chunk left invested. This sounds too good to be true and I am concerned that we’re missing some hidden catch. Since I’m the one that controls most of the finances, I want to make sure we’re making the right decision and not just going off on a ledge.

As always, here is the largest of the fourlegged fur family member. Timber is a part Saint Bernard, a rescue and the only dog I’ve ever owned. She is super amazing and has set the doggie bar so high, I don’t think any other dog would measure up. She turned 10 this fall.

Borrowing against the equity in the house to fix the house is not a bad idea, since rates are relatively reasonable and you’ll possibly be adding value to the place. But, but, but – it sounds like you don’t have any other funds, so this is just a debt grab. Do you really need to do this work? Does Timber care?

As for your hubs, they must be spiking the coffee pods at work.

The maximum amount one can borrow on a HELOC is 65% of the existing equity, and for that you must have an appraisal. Therefore: appraised value minus outstanding mortgage principal = equity x 65% = max HELOC. This can be pushed to 80% of value, but the additional amount must be in the form of a traditional amortized mortgage. Payments for the line of credit portion can, indeed, be interest-only, but the mortgage hunk requires blended payments And remember that these days HELOC rates are a helluva lot higher than those for a mortgage – about 4.5% vs 2.5%. Additionally, the line is a demand loan at a variable rate. It can rise when rates head back up, and the bank can (conceivably) yank it at will. Unlikely but worth knowing.

The bottom line: a mortgage is ultimately cheaper and forces repayment. No, you can’t get a HELOC for 100% of the value of the house. Interest-only payments mean the debt remains and will have to be retired at some point. And you should expect interest rates to rise in the future, since we’re at the bottom end of the curve. If they don’t because the economy tanks, then the odds of your unrepaid HELOC being recalled by the bank shoot higher.

Here’s a rad thought, Wendy: if you don’t have any money, maybe you shouldn’t spend any. Ask your dad.



Source: https://www.greaterfool.ca/2019/09/20/balance-4/

Support BeforeitsNews by trying our natural health products! Join our affiliate program
Order by Phone at 888-809-8385 or online at www.mitocopper.com


Get our Free Ebook, "Suppressed Health Secrets"  with  Natural Cures THEY don't want you to know!

APeX - Far superior to colloidal silver!  Destroys Viruses, Bacteria, Pathogens with Oxygen plus Silver!Supreme Fulvic - Nature's most important supplement! Vivid Dreams again!
Ultimate Curcumin - Natural pain relief, reduce inflammation and so much more.
MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen!  
Organic Hemp Extract (CBD) - Full Spectrum high CBD (3300mg) hemp extract eases stiff joints, relieves stress and more!
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover -  Reduces Smart Meter radiation by 96%!  (See Video)


FINAL WARNING!   Diseases are EXPLODING!  Watch this Video about APeX and You'll THROW AWAY Your Colloidal Silver!   APeX destroys Viruses, Bacteria and other Pathogens with the power of Oxygen PLUS Silver!  Nobody else has a product like THIS!   See why the inventor hasn't been sick in 16 years and why you'll never hear about it on the FAKE NEWS!  Get some now and tell your friends about it too so we can reach more people!  

APeX Interview - Superior to Colloidal Silver from Lee Canady on Vimeo.

Learn about APeX Here and Get the 50 Page Report in PDF format.   Call us at 888-809-8385 to order by phone.

Report abuse

Comments

Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

MOST RECENT
Load more ...

SignUp

Login

Newsletter

Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.