Communities

Writing
Writing
Codidact Meta
Codidact Meta
The Great Outdoors
The Great Outdoors
Photography & Video
Photography & Video
Scientific Speculation
Scientific Speculation
Cooking
Cooking
Electrical Engineering
Electrical Engineering
Judaism
Judaism
Languages & Linguistics
Languages & Linguistics
Software Development
Software Development
Mathematics
Mathematics
Christianity
Christianity
Code Golf
Code Golf
Music
Music
Physics
Physics
Linux Systems
Linux Systems
Power Users
Power Users
Tabletop RPGs
Tabletop RPGs
Community Proposals
Community Proposals
tag:snake search within a tag
answers:0 unanswered questions
user:xxxx search by author id
score:0.5 posts with 0.5+ score
"snake oil" exact phrase
votes:4 posts with 4+ votes
created:<1w created < 1 week ago
post_type:xxxx type of post
Search help
Notifications
Mark all as read See all your notifications »
Incubator Q&A

Welcome to the staging ground for new communities! Each proposal has a description in the "Descriptions" category and a body of questions and answers in "Incubator Q&A". You can ask questions (and get answers, we hope!) right away, and start new proposals.

What is the impact of potential cap gains exposure for a retail ETF investor? Question

+1
−1

Apparently, ETFs have a "potential cap gains exposure" in that, when the ETF buys and sells some underlying asset, it is subject to capital gains tax. Supposedly, this leads to things like buying an ETF, and losing money on taxation of capital gains that occurred before you bought the ETF yourself.

I thought that as a retail investor, the only tax you pay with an ETF is the capital gains tax on the difference between sell and buy price of the ETF. The capital gains on the ETF's comprising assets are not the ETF investor's problem - the fund itself handles those and the outcome is "baked in" to the ETF price. So you only pay a tax on your purchase of the ETF, not the purchases of stocks within the ETF.

Does this "potential cap gains exposure" actually affect a retail investor in a meaningful way?

Some popular ETFs like index funds might not make trades frequent, which makes them complicated in this context. So let's say we're talking about an ETF that is actively managed, and frequently opens and closes whole positions within the tax year.

History
Why does this post require moderator attention?
You might want to add some details to your flag.
Why should this post be closed?

0 comment threads

0 answers

Sign up to answer this question »