Posted by Tim Stobbs on March 2, 2007
Unless you have been living under a rock you have noticed that the TSX dropped a heart stopping 400 points or so this week. Has this made me nervous or did I sell off anything. No, actually we went shopping during the drop.
My wife picked up EIT.UN at $6.18, which is a income trust that is comprised of shares of other income trusts in her taxable account. So it is similar to a mutual fund, but have the structure of an income trust. What is nice about this fund is 21% of it is made up of REIT’s which won’t be taxed under the new law for other income trusts. So the excellent yield of 13.5% at which my wife got it will likely drop to around 9% after the new rules come into play, which is still a great number. The other nice thing is about 40% of the distributions won’t be taxable (as return on capital). So overall it was a great deal for us.
The problem with this decision was now I will have to use my line of credit to initially pay for the new furnace going in around the middle of this month until I get my tax return around late April. Yet earning 13.5% on that money for years ahead seems worth it to pay 8.5% on the line of credit for a month and a half.
PS: A reminder that I’m not your adviser and you should do your own research before determining if EIT.UN is right for you.