2007-02-11 15:03:34 · 7 answers · asked by stockmarketwiz21 2 in Business & Finance ➔ Investing
The above answers are not totally correct. You get taxed on your gains when you sell. But, since ETFs are (as one responder mentioned) passively managed index mutual funds, they buy and sell some securities during the year, as the index add or drops stocks, so they may distribute capital gains. You pay taxes on those distributions plus distributions of any dividends each year.
2007-02-11 22:24:15 · answer #1 · answered by gosh137 6 · 3⤊ 0⤋
The quick answer is: possibly, but less than other mutual funds. It certainly depends on the provider, but usually the ETFs are designed to be tax efficient.
One problem with mutual funds is that it's often difficult for the managers to manage capital gains/ losses because of inflows and outflows of cash (people moving money in and out of the funds), which result in forced purchases and sales of assets. ETFs don't have that problem since you simply buy or sell shares without any effect on the underlying portfolio.
There are, however, possible tax implications due to index rebalancing. Since the ETFs track specific indices, they have to adjust their positions whenever an index provider makes changes to the index. Good manages are usually on top of this and use strategies like loss harvesting to offset any forced capital gains in the portfolio.
Try to find how the ETFs you are considering have been able to manage the tax liability in the past. Some are better at it than others.
2007-02-12 13:12:06 · answer #2 · answered by mm 1 · 0⤊ 0⤋
No is the simple answer.
ETF's are essentially passively managed mutual funds. You chose what sector of the market you want to be in and you're in it. You take the good with the bad. There are virtually no tax implications on it. The exceptions would be dividends (qualified dividends are currently taxed at 15% but check with your tax professional to make sure that is applicable)- and obviously the sale (at a profit) of your ETF
2007-02-11 15:35:51 · answer #3 · answered by zach z 2 · 1⤊ 0⤋
you only pay taxes if you have a capital gain when you sell the
ETF (exchange traded funds) if you receive a dividend, it is taxable in which year it was receive. in other words, you do not pay taxs every year as long as you dont sell and dont receive any dividends
2007-02-11 21:30:46 · answer #4 · answered by bong1020 1 · 1⤊ 0⤋
Just buy 1 and make some money. Taxes last thing to worry about.
2007-02-12 02:48:25 · answer #5 · answered by vegas_iwish 5 · 0⤊ 0⤋
ETF r just like stocks, so i'm assuming yes.
2007-02-11 15:27:00 · answer #6 · answered by Ilya L 1 · 0⤊ 1⤋
Yes.
2007-02-12 05:03:09 · answer #7 · answered by Anonymous · 0⤊ 1⤋