Thought you had escaped the annual distribution of capital gains when you moved from funds to ETFs? Think again.
According to Morningstar, last year 95 or 18% of all exchange-traded funds distributed capital gains and 47 of those funds distributed gains in excess of 1% of capital.
Capital gains distributions are painful because they require the investor to pay taxes before selling the investment – 15% for long term gains and 35% for short term gains.
Read more about capital gains distributions and ETFs in Ian Salisbury’s article in the WSJ.