Despite the S&P/TSX 60 Index returning an impressive +25%[1] gain so far this year, not all sectors and stocks have shared in this growth. TD Bank, one of Canada’s largest financial institutions, has faced significant challenges in 2024, leading to notable declines in its share price (-7.5% YTD¹).

For investors holding common shares of TD Bank that are in an unrealized capital loss position, within non-registered accounts, this presents a potential opportunity to crystalize that unrealized loss to offset taxable capital gains through tax-loss selling. When executing this strategy, Canadian investors need to be aware of the CRA’s superficial loss rule, which states that you can claim a loss for tax purposes on a security you sell at a loss, but you cannot repurchase the same security within 30 calendar days. By realizing capital losses and re-investing the proceeds into a Canadian financials ETF, investors can reduce their tax liability while maintaining exposure to the sector. To learn more about how tax-loss selling can help optimize your investment portfolio, CLICK HERE.

As one of Canada’s largest providers of financial sector ETFs, Hamilton ETFs offers a variety of strategies for investors with unrealized losses in TD Bank shares to consider as potential tax loss switch ideas.

Hamilton ETFs — Canadian Bank & Financials ETFs

TICKER	STRATEGY	YIELD[2]	% WEIGHT IN TD*
HMAX	Income-first, covered call strategy on Canada’s largest financials	13.70%	13.6%
HCAL	Equal-weight Canada’s “Big-6” banks, with modest 25% leverage	6.00%	18.2%[3]
HFIN	Equal-weight Canada’s largest financials, with modest 25% leverage	4.48%	9.8%
HEB	Low-cost, equal-weight Canada’s “Big-6” banks (0.19% management fee)	4.15%	14.6%
HCA	Mean reversion — overweight recent underperformers	4.76%	26.0%

*As at November 29, 2024.

Performance

TICKER	YIELD	1 MONTH	3 MONTHS	6 MONTHS	YTD	1 YEAR	3 YEAR*	INCEPTION*
HMAX	13.70%	6.1%	10.1%	17.0%	22.0%	28.2%	–	11.4%
HCAL	6.00%	6.7%	15.7%	25.5%	31.0%	48.9%	9.8%	20.2%
HFIN	4.48%	10.0%	19.2%	31.0%	42.8%	55.1%	–	15.2%
HEB	4.15%	5.5%	12.7%	20.8%	26.0%	39.7%	–	20.2%
HCA	4.76%	6.0%	13.0%	17.5%	19.3%	31.9%	7.7%	16.8%

As at November 29, 2024. *Annualized

 

• CLICK HERE to view another Tax-Loss Switch Idea: Telecom Stocks (BCE, T, RCI)

 

Important Considerations for Tax-Loss Selling

Tax-loss selling can be a valuable tool for managing your portfolio and tax obligations, but it requires careful planning. Keep the following in mind:

• Seek Professional Advice
  Consult a tax professional to ensure your strategy aligns with your financial goals and complies with applicable tax regulations
• Monitor Deadlines
  Pay attention to year-end deadlines if you want to apply losses to the current tax year. Remember, trade settlements typically occur one business day after a sale, so plan accordingly to ensure transactions are finalized on time

 

This material is provided for informational purposes only. The information contained herein does not constitute, and should not be construed as, investment, tax, or legal advice. Specific investment decisions and strategies should be assessed in the context of an individual’s personal financial objectives, and professional advice should be sought for any particular circumstances.

 

____

A word on trading liquidity for ETFs …

Hamilton ETFs are highly liquid ETFs that can be purchased and sold easily. ETFs are as liquid as their underlying holdings and the underlying holdings trade millions of shares each day.

How does that work? When ETF investors are buying (or selling) in the market, they may transact with another ETF investor or a market maker for the ETF. At all times, even if daily volume appears low, there is a market maker – typically a large bank-owned investment dealer – willing to fill the other side of the ETF order (at net asset value plus a spread). The market maker then subscribes to create or redeem units in the ETF from the ETF manager (e.g., Hamilton ETFs), who purchases or sells the underlying holdings for the ETF.

____

Commissions, management fees and expenses all may be associated with investments in exchange traded funds (ETFs) managed by Hamilton ETFs. Please read the prospectus before investing. Indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and does not take into account sales, redemptions, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Only the returns for periods of one year or greater are annualized returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

Certain statements contained in this website may constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to a future outlook and anticipated distributions, events or results and may include statements regarding future financial performance. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “anticipate”, “believe”, “intend” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Hamilton ETFs undertakes no obligation to update publicly or otherwise revise any forward-looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law.

____

[1] As at November 29, 2024. Source: Bloomberg
[2] An estimate of the annualized yield an investor would receive if the most recent distribution remained unchanged for the next 12 months, stated as a percentage of the price per unit on November 29, 2024. The yield calculation excludes any additional year end distributions and does not include reinvested distributions.
[3] HCAL invests in the Hamilton Canadian Bank Equal-Weight Index ETF (HEB) which invests in Canada’s “Big-6” banks.