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A DIY Leveraged Investing Option

Almost three years after Fraser Smith passed on, the financial technique he popularized (the Smith Manoeuvre) is still actively used. One of the most common questions prospective Smith Manoeuvre users have is, “What is the best mortgage to do it with?”

That answer hinges on where you trade, the mortgage rate and terms you receive, and who advises you on your investments, among other things. But if you’re a self-directed investor, one solution stands out: the Scotiabank STEP.

The STEP is one of just a handful of mortgages well suited to the Smith Manoeuvre. It has:

  • Automatic readvancing (i.e., as you pay down the mortgage, you can instantly re-borrow that money)
  • Support for hybrid mortgages
  • Excellent prepayment options
  • Intuitive online access

For do-it-yourself types who plan to borrow to invest, there are few solutions as integrated as iTrade and the STEP. For one thing, you can log in to Scotiabank’s website and view your mortgage balance, line of credit (LOC) balance and iTrade account balance(s) all on the same screen.


You can also use Scotia’s website to transfer funds directly from the LOC to your iTrade account. Simply pick the “from” account, the “to” account, the amount and the effective date. (Inquire with Scotia about automating funds transfers.)

Scotia’s solution eliminates a step required by some competitors, which make you first move money from the LOC to a chequing account, and then transfer it to your investing account. This convenience matters since leveraged investing strategies require regular funds transfers.

Other lenders connect your investments and mortgage as well (e.g., RBC and BMO), but none combine the mortgage features of the STEP, the breadth of iTrade’s investment and account options, and the linkage between investing and credit line accounts like Scotiabank.

Notes: Leveraged investing entails risk. Get professional advice from a licensed financial advisor before you consider it. Disclosure: Some of our staff maintain personal investment accounts, held by the firms in this story.

Rob McLister, CMT (email)