If you are looking for a way to boost your portfolio returns without taking on more risk or doing more work, you might want to consider lending your stocks with National Bank Direct Brokerage (NBDB).
What is stock lending?
Stock lending is a process where you lend your fully-paid securities (stocks or ETFs) to a broker, who then lends them to another investor who wants to sell them short. Short selling is a strategy where an investor bets that the price of a stock will go down by borrowing it, selling it, and buying it back later at a lower price.
Why would you lend your stocks?
By lending your stocks, you can earn extra income from the fees that the short seller pays to borrow them. These fees are based on the market demand and supply of the shares, and can vary depending on the stock and the currency. You will receive 50% of the income earned from lending your stocks, paid directly into your NBDB account.
What are the benefits of lending your stocks with NBDB?
There are many benefits of lending your stocks with NBDB, such as:
- No additional fees: There are no monthly or annual fees associated with this program.
- Peace of mind: Your loaned securities are fully collateralized at 102% by Natcan Trust Company (NTC), an affiliate of National Bank Financial (NBF). This means that if the borrower fails to return your securities, NTC will reimburse you with cash or equivalent securities.
- Transparency: You can consult your loaned securities and your monthly reports at any time on NBDB's platform.
- Flexibility: You can sell or exclude securities or leave the program at any time. You retain all the rights and benefits of owning the securities, such as dividends, voting rights, and capital gains.
- No action required: After you open your account, no further action is required on your part. Your securities will be lent automatically when opportunities arise.
How to enroll in the program?
To enroll in the program, you need to meet the following eligibility criteria:
- You must be a client of NBDB Distinctive Services or have $100,000 or more in assets in a non-registered account.
- You must have fully-paid securities that are eligible for lending. These include Canadian and U.S. stocks and ETFs that are listed on major exchanges and have sufficient market demand.
My Verdict
One of the reasons I like the NBDB stock lending program is that it offers me attractive lending rates for some of the small/micro-cap companies that I own. By lending these high-demand stocks, I was able to increase my portfolio return by 1.5-2% without taking any additional risk or effort.
On the other hand, I also have a Wealthsimple Trade account where I enrolled in their stock lending program, but so far I haven't seen any income from it. However, Wealthsimple allows me to lend stocks from my TFSA and Cash Account without a $100k limit restriction. I will keep you posted since I shifted my CAD TFSA to Wealthsimple for additional stock lending income.
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