After entering the crypto scene last year, Toronto’s Wealthsimple this year added even more ways for Canadians to save and invest, including private credit opportunities for retail investors and enhanced cash holding features.
Now the fintech has introduced app-based stock lending, allowing stockholders to “rent out” their shares to traders.
“All you do is offer up your stock to traders who pay you to borrow it,” the firm explains online. “It’s like Airbnb for your portfolio—and you don’t even have to change the sheets.”
Borrowing stockholders pay a fee, typically on a monthly basis. They might need these stocks for a plethora of reasons—as collateral for securing business deals, for regulatory compliance, for shorting the stock, for maintaining narrow price spreads in trading, or even for voting rights to influence management decisions.
“For shareholders, stock lending offers a relatively low-risk way to earn extra returns on the stocks you already own,” Wealthsimple posits, adding that you maintain ownership of your stocks the whole time: “If loaned stocks go up in value, those returns are still yours.”
The potential earnings from stock lending are driven by supply and demand. The more traders want to borrow a specific stock a person owns, the higher the fee they can charge for lending it out.
You can even decide to sell your stocks while they’re loaned out.
There are risks involved, of course—such as the remote possibility that the borrower could face bankruptcy, which would make it challenging for them to return the borrowed stock.
While Wealthsimple isn’t Canada’s first financial platform to offer stock lending as an option, it is perhaps the most accessible—with no minimum assets required to participate and no third-party involvement required. Most programs in Canada force you to call a representative, who will typically expect at least $50,000 in portfolio value.
“But with Wealthsimple, just head to the app,” the fintech says.