Q: I have held BNS in my cash account for several years and the stock has been essentially flat. I am looking to replace it with HCAL. There would be minimal capital gains tax and they have essentially the same yield. HCAL has 1.25 leverage to the big Cdn banks. Thinking of the tendency of individual banks reverting to the mean , am I selling BNS at the wrong time as it does seem to be participating in the industry’s strength of late. What do you think of this move ?
Thanks. Derek.
Thanks. Derek.
5i Research Answer:
We would be ok with this switch. It maintains exposure to financials and adds diversification (albeit a bit of a different risk with the leverage component in the ETF). If financials contnue their momentum, HCAL should still participate.