Last year’s bear-market drop meant large gains for short or inverse performing ETFs. By design, these types of ETFs rise in value when stocks or bonds fall.
As a result, these types of ETFs paid out the largest capital gains distributions in 2008. Fast forward to today. Because of surging stock prices, the opposite has occurred.
The largest capital-gains distributions for this year will likely be for leveraged long ETFs. Investors with these types of ETFs inside their portfolios should be especially vigilant in avoiding the coming tax hit.