I am basically doing path 2. My goal was to make this as automated as possible. So each month, I have my brokerage account automatically withdraw the same amount directly from my HELOC. I then also set up my brokerage account to automatically buy investments (TD eseries) on that same day. So the actual investing part of my SM is fully automated. Once a month when my HELOC statement arrives, I transfer the interest payment from my chequing account to the HELOC and then withdraw that same amount back to chequing to capitalize the interest.MRobi1 wrote: ↑ My comment on being backwards stemmed from keeping the withdrawl amount the same and lowering the investment amount each month, whereas you'd really want to increase the withdrawl monthly but keep the investment amount the same. So we're really saying the same thing here
Where I'm curious on which route may be better is this...
Month 3 from the example above, withdraw $1,005 from HELOC, invest $1,000, use the remaining $5 to service interest. HELOC balance: $1,005
Month 3, withdraw $1,005 from HELOC, invest $1,005, $5 interest charge billed to HELOC, pay from chequing act, reborrow $5 to replenish chequing. New HELOC balance: $1,010.
In path 2, your HELOC balance will grow at a faster rate but your investment will also grow at a faster rate. My assumption (and why I'm asking if anybody has done the math), is that path 2 will give better results because that $5 should be earning at a higher rate than the $5 interest charge, and a longer time in the market should net better results. Yes you'll need enough in your chequing account to cover the interest charge, but you'll be reborrowing it right away so it doesn't really have any affect on your cash flow.
I am not concerned that each month my principal payment amount is going up slightly on the mortgage. Every so often when the difference becomes material enough I will alter the automated withdrawal/investment up to account for this.