Back in December, after saying some words about borrowing to invest, I decided to put my (figurative) money where my mouth is (was?) and create a portfolio that I would use if I was using the bank’s money to invest in the market.

Here are the ground rules:

  • The portfolio would be a 50/50 split between borrowed and original capital, with the opening value of $75,000
  • The portfolio would be mostly Canadian stocks, but with a couple of U.S. ones mixed in for fun
  • No additional money would be added, because like hell I’m going to figure that out. If I was going to add more cash, I’d probably use it to pay off the debt taken out in the first place
  • The assumed interest rate will be 3%
  • Once a stock cuts the dividend, it’s out of the portfolio, replaced with something else

When we last looked at the portfolio, it was underperforming the TSX Composite by about 1% after accounting for the dividends. The decrease in the U.S. Dollar helped the American side of the portfolio, and Extendicare was the big winner on the Canadian side. Bombardier cut its dividend, and I replaced it with Manitoba Telecom.

Let’s take a look at the most recent results:

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If you exclude dividends, the value of the shares are down about $3,000, and are down $1,300 from the original investment, made back on December 5th, 2014. Once you add the dividends back on, I’m up marginally, to $75,674.47. That’s good enough for a return of 0.90%.

As much as it sounds like a copout, this portfolio isn’t all about the capital gains. The whole point was to use the income generated by dividends to pay off the interest, which the portfolio has easily done. So far the portfolio has generated $1,879.87 in dividends, while we’ve paid interest of $1,220.55.

Since December 5th, the TSX Composite Index is up 1.23%, marginally beating my portfolio. But since the last update on February 20th, the TSX Composite is down 3.47%, compared to the portfolio’s loss of just 2.27% (including dividends). That’s not bad, considering how I’m getting much higher dividends than the index investor would be.

Some individual notes on some of the companies:

  • Extendicare continues to do well. Including dividends, it’s the best performing stock on the list. I own it personally and think it’s worth close to $10 per share
  • Pizza Pizza is a stock I’ve been buying on the recent pullback. Now that shares are yielding 6% I think I’ll add to my position
  • The recent election in Alberta hit both TransAlta and Cenovus. Typical NDP, crushing the dreams of capitalists
  • All three U.S. stocks continue to perform pretty well
  • Rogers Sugar has paid out the most dividends. I own this one as well

And that’s about it. So far, not a bad performance.

Tell everyone, yo!