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14 ETF Tax Facts to Know

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Related: 10 Social Security Tax Facts to Know

Exchange-traded funds possess characteristics of traditional mutual funds, which issue redeemable shares, and of closed-end investment companies, which generally issue shares that trade at negotiated market prices on a national securities exchange and are not redeemable.

ETFs are thought to have certain benefits compared with traditional mutual funds, including lower expense ratios and certain tax efficiencies and allowing investors to buy and sell shares at intraday market prices. Investors can also sell ETF shares short, write options on them, and set market, limit, and stop-loss orders on them. ETF shares can be bought on margin.

Are you advising your clients correctly when it comes to their investments in ETFs? See the gallery for 14 important tax and financial planning questions and answers advisors should be aware of regarding ETFs and taxation rules around this investment vehicle, according to ALM’s Tax Facts Online.

(Graphics: Chris Nicholls/ALM)


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