Q: Hi Team, as I implement the Smith Maneuver, I'm planning to invest monthly using the HELOC portion that becomes available with each mortgage payment. Given that the investment amounts will be relatively small and consistent each month, what would be the most effective investment approach in this context? Should I:
Invest the available funds into a fixed list of individual stocks (using partial shares if necessary),
Choose from the same list based on valuation or price action each month and % of portfolio or
Keep it simple and invest in a broad-market ETF for diversification and simplicity?
I’m trying to balance long-term growth potential with practicality, given the size and frequency of contributions. What do you recommend in terms of both investment strategy and tax efficiency for this kind of structure?
Thanks!
Invest the available funds into a fixed list of individual stocks (using partial shares if necessary),
Choose from the same list based on valuation or price action each month and % of portfolio or
Keep it simple and invest in a broad-market ETF for diversification and simplicity?
I’m trying to balance long-term growth potential with practicality, given the size and frequency of contributions. What do you recommend in terms of both investment strategy and tax efficiency for this kind of structure?
Thanks!
5i Research Answer:
Many brokers allow the purchase of ETFs to be commission-free, and this would be beneficial in such a scenario. With small amounts, we would certainly prefer an ETF for diversification and simplicity. There are some 'total return' ETFs that do not pay distributions, so can be quite efficient from a tax viewpoint. We would suggest HXS here, representing the S&P 500.