ETFs are more tax efficient than mutual funds.

Question

Quizplus · Accepted Answer

ETFs have unique features such as in-kind redemptions that allow them to be more tax efficient compared to mutual funds. Mutual funds are required to distribute capital gains to their shareholders annually, which can result in tax liabilities for individual investors. ETFs, on the other hand, typically do not have to distribute capital gains because of their creation and redemption process. This can result in less taxable events and increased tax efficiency for investors.

ETFs Are More Tax Efficient Than Mutual Funds