Q: I have over 8000 shares of VFV in my NR, up about 50%. I am looking to hold for 20 years and not touch them. Unbeknownst to me when I bought them, I now realize there is a tax disadvantage compared to HXS. How much performance drag will occur from the tax disadvantage, and would it be worth the capital gains tax to sell and switch?
I could sell and incur huge capital gains on these shares, but I am not sure if it would be worth paying the capital gains to sell them and buy HXS.
My alternate plan going forward was to buy HXS with my dividends, instead of VFV.
I could sell and incur huge capital gains on these shares, but I am not sure if it would be worth paying the capital gains to sell them and buy HXS.
My alternate plan going forward was to buy HXS with my dividends, instead of VFV.
5i Research Answer:
Level I withholding taxes on VFV would result in a 'cost' of 0.19% based on its current indicated yield. Fees are 0.09%. HXS fees are 0.10%, but derivative/trading fees are up to 0.30%. Horizons notes total fees of 0.40% on its website. So, with lower fees, VFV still looks better on a non-capital-gain-taxed basis. If one is in a high tax bracket, the capital gains tax to be paid on a VFV sale would be in the 25% range (50% of gains). Thus, for existing units, we would not see any benefit of a switch. But a plan to start adding HXS would make sense to us.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in VFV.