Canadian equity markets, exchange traded funds, mutual funds and individual Canadian stocks have had less than a stellar year in 2011 to date. On average, most Canadian securities are trading at lower levels than recorded on Dec. 31, 2010. The TSX composite index is down 10.2 per cent. Opportunities to reduce capital gains tax are available by switching out of Canadian-listed securities with a capital loss prior to the close on Dec. 23. Realized losses can be applied against realized capital gains, can be carried back three years, or can be carried forward indefinitely.
Investors can avoid the 30-day rule set by the tax man when realizing capital losses. Investors are required to wait 30 days before buying back a security in order to preserve the loss for tax purposes. Instead of waiting for 30 days to repurchase a favoured security, investors simply can switch into securities that have comparable investment characteristics.
Opportunities to switch from existing Canadian-listed ETFs trading at a loss into similar ETFs are listed below. Leveraged ETFs were not included in the survey. ETFs with a loss of 10.0 per cent or more since the beginning of the year were identified:
iShares S&P/TSX Energy
Percent Loss Since Dec. 31: 14.4
Replacement: BMO Equal Oil and Gas
iShares MSCI EAFE
Percent Loss Since Dec. 31: 12.6
Replacement: Claymore International
iShares China Index Fund
Percent Loss Since Dec. 31: 12.1
Replacement: Claymore China Index
iShares MSCI Brazil
Percent Loss Since Dec. 31: 19.5
Replacement: Claymore BRIC
Claymore Oil Sands
Percent Loss Since Dec. 31: 20.3
Replacement: iShares S&P/TSX Energy
Claymore BRIC
Percent Loss Since Dec. 31: 19.0
Replacement: iShares MSCI Brazil
Claymore Mining
Percent Loss Since Dec. 31: 18.6
Replacement: BMO Equal Base Metals ZMT
Claymore International
Percent Loss Since Dec. 31: 12.0
Replacement: iShares MSCI EAFE
Claymore Banks and Lifeco
Percent Loss Since Dec. 31: 14.2
Replacement: BMO Equal Wt. Banks
Claymore China Index
Percent Loss Since Dec. 31: 11.9
Replacement: BMO China Index
BMO International
Percent Loss Since Dec. 31: 12.4
Replacement: Claymore International
BMO Emerging Markets
Percent Loss Since Dec. 31: 13.8
Replacement: iShares Emerging Markets
BMO China Index
Percent Loss Since Dec. 31: 19.6
Replacement:
iShares S&P/TSX China
BMO Equal Base Metals 29.4
Percent Loss Since Dec. 31: 29.4
Replacement: iShares Global Base Metals
Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst for JovInvestment Management Inc. All of the views expressed herein are his personal views although they may be reflected in positions or transactions in the various client portfolios managed by JovInvestment. JovInvestment is the investment manager for the Horizons family of ETFs. Daily reports are available at http://www.timingthemarket.ca/