Most investors optimize stock taxes.
Very few optimize bond taxes.
In this video, I explain how the BMO Discount Bond Index ETF (ZDB) shifts return away from fully taxable interest income and toward more tax-efficient capital gains — without materially changing risk.
If you hold bonds in a non-registered account, this may be one of the simplest structural upgrades available.
00:00 – Introduction
00:40 – Why Bond ETFs Can Be Tax Inefficient
01:19 – What Is a Discount Bond?
01:45 – How ZDB Shifts Return Toward Capital Gains
02:12 – How the Index Screens for Lower-Coupon Bonds
02:58 – Does ZDB Take More Risk? (Duration Explained)
04:07 – ZDB vs. ZAG: After-Tax Performance (2014–2024)
05:04 – Why the Tax Advantage Matters
05:25 – Why More Investors Don’t Use ZDB
06:49 – Who Is ZDB Actually For?
07:26 – Final Takeaway
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@Perrier Greg – My records show that you are subscribed to the CPM Newsletter, as of April 15, 2020 (perhaps your email is sending the notifications to your spam folder?).
Hi Justin, great post as usual.
The annual financial statements for ZDB on the BMO website show this ETF to have a somewhat large carry-forward capital loss. Presumably this will eliminate any future annual reinvested/phantom distributions until the loss is depleted, meaning there is currently an additional tax deferral benefit? Am I interpreting this correctly?
@Robert – Thanks so much for watching!
You’re reading these reports correctly, although they’re a bit out-of-date (so ZDB’s managers may have already used a portion of these losses to offset gains throughout 2025/2026).