Visual Guide to ETFs

Tax Efficiency

I present the basics of why ETFs are different than other investment products in terms of their tax consequences, but I am not a tax attorney or an accountant. Each individual situation is different, and you should consult your own advisors regarding your personal tax situation. I am also discussing the funds in a normal taxable environment. Things can change when the funds are held in tax-deferred accounts and other structures.

The concept of the tax efficiency of the ETF structure is another major feature that is helping to drive growth. In trying to simplify the discussion down to its most important aspects, I have isolated three subcategories:

• Tax efficiencies within the portfolio management process

• Tax efficiencies within ...