ETFs and capital gains distributions

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.

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