Comments on: Investing With Exchange Traded Funds (ETFs) http://cashmoneylife.com/investing-exchange-traded-funds-etfs/ Money Management, Small Business, Career Thu, 09 Feb 2012 19:08:34 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Ryan http://cashmoneylife.com/investing-exchange-traded-funds-etfs/#comment-24825 Ryan Wed, 28 Jul 2010 14:11:03 +0000 http://cashmoneylife.com/?p=2576#comment-24825 Doug, from my understanding, there are a few reasons. One is that most ETFs are based on index funds, which typically have a lower turnover rate than many mutual funds. Fewer trades means fewer realized gains, limiting the capital gains ETF holders pay. Another contributing factor is that the ETFs are bought and sold on the market, instead of being managed strictly by a mutual fund company or index fund manager. This means the fund itself doesn't have to pay taxes each time it sells assets to meet investor needs (which trickles down to everyone). Since ETFs are more like a share of stock, investors usually only pay taxes when they sell their share. Eventually investors will have to pay capital gains taxes when they sell their shares. The difference is they have better control with an ETF than they do with a mutual or index fund. Doug, from my understanding, there are a few reasons. One is that most ETFs are based on index funds, which typically have a lower turnover rate than many mutual funds. Fewer trades means fewer realized gains, limiting the capital gains ETF holders pay.

Another contributing factor is that the ETFs are bought and sold on the market, instead of being managed strictly by a mutual fund company or index fund manager. This means the fund itself doesn’t have to pay taxes each time it sells assets to meet investor needs (which trickles down to everyone). Since ETFs are more like a share of stock, investors usually only pay taxes when they sell their share.

Eventually investors will have to pay capital gains taxes when they sell their shares. The difference is they have better control with an ETF than they do with a mutual or index fund.

]]> By: Doug Warshauer http://cashmoneylife.com/investing-exchange-traded-funds-etfs/#comment-24815 Doug Warshauer Wed, 28 Jul 2010 01:57:34 +0000 http://cashmoneylife.com/?p=2576#comment-24815 Great summary of ETFs. In general, comparing a good ETF to a good indexed mutual fund, I've always been relatively indifferent. I would like to know a little more about the differences in tax treatments - can you explain that in more detail? Great summary of ETFs. In general, comparing a good ETF to a good indexed mutual fund, I’ve always been relatively indifferent. I would like to know a little more about the differences in tax treatments – can you explain that in more detail?

]]> By: Eric A http://cashmoneylife.com/investing-exchange-traded-funds-etfs/#comment-24803 Eric A Tue, 27 Jul 2010 16:42:31 +0000 http://cashmoneylife.com/?p=2576#comment-24803 I have been reading a little about ETFs, mostly on Wiki until I found your site. This is a really nice breakdown! I have been reading a little about ETFs, mostly on Wiki until I found your site. This is a really nice breakdown!

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