Blog Article:

Exchange-traded Fund (ETF) Tax Efficiency

Disclaimer: The article referenced below discusses topics at the nexus of investments and taxes, but does not provide and should not be construed as providing tax advice. Please contact your CPA or tax professional for guidance on tax-specific issues.

Note: Please see my video discussion of this topic below or other videos on my videos page. You may also want to read my PDF guide entitled Sensible Strategies to Reduce Your Taxes or other articles regarding retirement accounts on my Research page

Some people attribute their tax efficiency to the low-turnover nature of the indices underlying many ETFs. Low turnover is a factor but there is another critical driver of ETF tax efficiency: their in-kind creation and redemption process. If are interested in this topic, here is a link to an article on this topic: WHY ETFS ARE MORE TAX-EFFICIENT THAN MUTUAL FUNDS.

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Video on ETF tax efficiency: