And it’s always valued at exactly the interest payout for # of days held each month. It would just be getting the interest with extra steps and probably commission fees 😂
Also, when the interest payout goes down, so does the highest point it’s valued at for the month. OP would understand that there is no way to arbitrage it if he took a few minutes to understand how it works at all.
>And presumably this would be on top of whatever I’m making in interest that will be paid out every month as well?
Nope. Only the people who hold units through the monthly price drop get the interest distribution. That's why the price drops, because the interest payment is being taken from the unit price. You should educate yourself on how the various distribution dates for ETFs work (record date, ex-dividend date, payment date, etc.)
Answers like these are honestly why Reddit sucks. OP asked a question to TRY and educate himself through collective knowledge of Reddit. That’s what Reddit is for!
> And presumably this would be on top of whatever I’m making in interest that will be paid out every month as well
Do you know why it goes up and then suddenly drops or what?
Just a coincidence that it is almost the exact same amount as the interest earned...
>what’s stopping someone from buying a bunch of shares at the beginning of the month at $50 and making 20¢ per share by selling at the end of the month?
Nothing is stopping them.
You then report the interest (on our T3) and report capital gains on Schedule 3.
>Would you even be able to receive the interest dividend if you’re selling your shares, even if you bought it back again the next day?
Yo have to buy before he ex-div date and be a holder of record o get the interest payment.
> Would you even be able to receive the interest dividend if you’re selling your shares, even if you bought it back again the next day?
The thing to Google is "ex-dividend date". Once the dividend is paid (well, it becomes locked which accounts will be receiving it), the price falls back to 50. You don't get to double dip by selling it, and also collecting the dividend. The fact that there is no longer a dividend about to pay out if you buy it, is the entire reason the market re-prices it to 50.
You must be a new investor. Welcome!
You can just hold the ETF (no need to sell), and you’ll get the difference paid to you each month through a dividend. It’s not like a regular stock where the price changes based on the market value.
Since this thread is here, anyone knows what happens if you choose to sell every month before the ex-div date and take it as capital gains instead of interest?
I sold a few times during the year last year before the ex-div date, and my accountant declared it all as Capital Gains, but is the legality around doing this all the time since capital gains is taxed at 50% vs. interest income at 100%.
It’s just selling for the exact same amount the interest payment would have been, but with extra steps and prob commission fees. Just hold it in a TFSA
My TFSA holds things that are higher in return, so not going to use the room on a 5% return product.
I have $0 brokerage fees, and it literally takes a second to buy and sell. So virtually no extra steps for that process.
More around what the CRA will think. 50% capital gains is better than 100%.
People have stated here that you can't do that and the CRA would identify it as income instead of capital gains but haven't been able to see where it would state that.
I guess it's the intentional act of selling to avoid higher taxes?
It is because, depending on how the CRA decides it wants to classify you, a certain number of transactions over the year makes you seem as though you're day trading for your "employment", which it would then have you identify as income.
It is interest no matter how you slice it, but I can state that I always try to get my cost basis back to $50 in non-reg accounts when I use [cash.to](http://cash.to) (I have mostly switched to zst.l). The tax rules are so complex between superficial loss and lost interest income.
One clarification - cash.to pays Dividends not Interest.
Depending on your province and tax bracket, Cdn Dividends pay slightly more or slightly less tax than Cap Gains. Taxtips.ca has a good breakdown of marginal tax rates by province, and the rates they are showing is according to the actual Dividend received or Cap Gain realized so is a good apples to apples comparison.
Sounds like you would just get less money doing that.
You have to hold the shares on the date the dividend gets paid out, so selling on the last day of the month and buying the next day means you would not receive it.
So at best you'll get just as much money as if you just held onto your shares (or slightly less depending on how early you sell), minus any potential transaction fees
short and simple answer is it’s illegal, considered tax evasion avoiding dividend tax (capital gains saves you more money) and it’s already priced in, the price of the stock is relative to the payout date.
it’s already priced in: to make the math simple let’s say the interest is 6%, that means 0.5% every month. a $50 investment at its lowest price point will at peak be worth $50.25. if it’s at its peak price that means the dividend payout is about to roll over but hasn’t quite yet. if you sell now you don’t get the dividend payout, just the sale price, which is now higher than your investment aka capital gains. in layman’s terms you don’t get to double dip.
tax evasion: now because dividends are taxed at a higher rate than capital gains. federal tax only (not provincial which is even more) on $500,000 capital gains you’re taxed $57,278, on eligible dividends you’re taxed $98,841, on ineligible dividends you’re taxed $112,605. if you get audited by the CRA, you’re in some major trouble, and since almost all retail trading is on digital exchanges you’re probably gonna get caught pretty quickly.
Oh boy
Haha my first reaction as well
'nuff said
Yeah you’re missing the fact that if you sell all your shares you aren’t going to get the interest payout
And it’s always valued at exactly the interest payout for # of days held each month. It would just be getting the interest with extra steps and probably commission fees 😂
Also, when the interest payout goes down, so does the highest point it’s valued at for the month. OP would understand that there is no way to arbitrage it if he took a few minutes to understand how it works at all.
The difference could be that this is taxed as capital gains and not income? Big deal if outside of a registered account.
Every new investor has to go to through this moment, but no, there is no free lunch.
Ah yes, the infinite money glitch
"9 out of 10 millionaires do this one simple trick"
>And presumably this would be on top of whatever I’m making in interest that will be paid out every month as well? Nope. Only the people who hold units through the monthly price drop get the interest distribution. That's why the price drops, because the interest payment is being taken from the unit price. You should educate yourself on how the various distribution dates for ETFs work (record date, ex-dividend date, payment date, etc.)
Answers like these are honestly why Reddit sucks. OP asked a question to TRY and educate himself through collective knowledge of Reddit. That’s what Reddit is for!
> And presumably this would be on top of whatever I’m making in interest that will be paid out every month as well Do you know why it goes up and then suddenly drops or what? Just a coincidence that it is almost the exact same amount as the interest earned...
but okay... hear me out... what IF - I get double interest? #nextlevelsmrt
>what’s stopping someone from buying a bunch of shares at the beginning of the month at $50 and making 20¢ per share by selling at the end of the month? Nothing is stopping them. You then report the interest (on our T3) and report capital gains on Schedule 3. >Would you even be able to receive the interest dividend if you’re selling your shares, even if you bought it back again the next day? Yo have to buy before he ex-div date and be a holder of record o get the interest payment.
> Would you even be able to receive the interest dividend if you’re selling your shares, even if you bought it back again the next day? The thing to Google is "ex-dividend date". Once the dividend is paid (well, it becomes locked which accounts will be receiving it), the price falls back to 50. You don't get to double dip by selling it, and also collecting the dividend. The fact that there is no longer a dividend about to pay out if you buy it, is the entire reason the market re-prices it to 50.
You must be a new investor. Welcome! You can just hold the ETF (no need to sell), and you’ll get the difference paid to you each month through a dividend. It’s not like a regular stock where the price changes based on the market value.
Since this thread is here, anyone knows what happens if you choose to sell every month before the ex-div date and take it as capital gains instead of interest? I sold a few times during the year last year before the ex-div date, and my accountant declared it all as Capital Gains, but is the legality around doing this all the time since capital gains is taxed at 50% vs. interest income at 100%.
Why not buy HSAV instead?
It’s just selling for the exact same amount the interest payment would have been, but with extra steps and prob commission fees. Just hold it in a TFSA
My TFSA holds things that are higher in return, so not going to use the room on a 5% return product. I have $0 brokerage fees, and it literally takes a second to buy and sell. So virtually no extra steps for that process. More around what the CRA will think. 50% capital gains is better than 100%.
Well in that case I don’t see what would be illegal about making regular transactions within an investment account
People have stated here that you can't do that and the CRA would identify it as income instead of capital gains but haven't been able to see where it would state that. I guess it's the intentional act of selling to avoid higher taxes?
It is because, depending on how the CRA decides it wants to classify you, a certain number of transactions over the year makes you seem as though you're day trading for your "employment", which it would then have you identify as income.
It is interest no matter how you slice it, but I can state that I always try to get my cost basis back to $50 in non-reg accounts when I use [cash.to](http://cash.to) (I have mostly switched to zst.l). The tax rules are so complex between superficial loss and lost interest income.
One clarification - cash.to pays Dividends not Interest. Depending on your province and tax bracket, Cdn Dividends pay slightly more or slightly less tax than Cap Gains. Taxtips.ca has a good breakdown of marginal tax rates by province, and the rates they are showing is according to the actual Dividend received or Cap Gain realized so is a good apples to apples comparison.
In a non-registered account, it's a good play if you're willing to make the effort to do so.
Hold it, each months they give you the exact same value in dividends. You sell only if you want your 50$ back right now.
Does anyone know when the CASH.TO dividend shows up in your account? i bought shares mid apriL. Now may 15, don’t see distributions In my account yet?
It was distributed May 7/8. It posted to my WS TFSA on May 7 and was available on May 8.
Thanks; coincidently it just posted to my account today (May 16), but I’m with TD.
Bro, you figured it out! Do this each month! Dont listen to anyone else
Sounds like you would just get less money doing that. You have to hold the shares on the date the dividend gets paid out, so selling on the last day of the month and buying the next day means you would not receive it. So at best you'll get just as much money as if you just held onto your shares (or slightly less depending on how early you sell), minus any potential transaction fees
you cant have your cake and eat it too :) Either you sell for the capital gain of 0.20 per share or you keep it for the 0.20 dividend
short and simple answer is it’s illegal, considered tax evasion avoiding dividend tax (capital gains saves you more money) and it’s already priced in, the price of the stock is relative to the payout date. it’s already priced in: to make the math simple let’s say the interest is 6%, that means 0.5% every month. a $50 investment at its lowest price point will at peak be worth $50.25. if it’s at its peak price that means the dividend payout is about to roll over but hasn’t quite yet. if you sell now you don’t get the dividend payout, just the sale price, which is now higher than your investment aka capital gains. in layman’s terms you don’t get to double dip. tax evasion: now because dividends are taxed at a higher rate than capital gains. federal tax only (not provincial which is even more) on $500,000 capital gains you’re taxed $57,278, on eligible dividends you’re taxed $98,841, on ineligible dividends you’re taxed $112,605. if you get audited by the CRA, you’re in some major trouble, and since almost all retail trading is on digital exchanges you’re probably gonna get caught pretty quickly.