The Tax Bill of ETFs and ETNs

With the tax deadline rapidly approaching, it is absoltuly essential that investors understand how their exchange traded funds (ETFs) and exchange traded notes (ETNs) will be taxed.

With the vast array of ETFs to choose from, taxes can get tricky. In general the tax treatment of ETFs is relatively simple and is applicable to long-term and short-term capital gains rules and rates. For example if one held the SPDY (SPY) for less than one year, any gains would be subject to short-term capital gains rates and if held for longer than one year, then the gains would be subject to long-term capital gains rates. Read more of this post

The 4 Structures of ETFs

As the popularity of exchange traded funds (ETFs) continues to expand, it is important to understand the four different ETF structures. 

The first structure is that of a Unit Investment Trust, commonly referred to as a UIT.  A UIT is one of three basic types of investment companies.   The other two types are mutual funds and closed-end funds.

Here are some of the traditional and distinguishing characteristics of UITs: Read more of this post

Four Causes of ETF Tracking Errors

An exchange traded fund (ETF) is a basket of securities which can be bought and sold on an intraday securities exchange, making it highly appealing to investors. Furthermore, ETFs are structured in such a way that in an ideal world, they would track a specific index such as the S&P 500, Nasdaq 100, Russell 1000 or MSCI without deviation; however, tracking errors do occur and investors should be aware of them. Read more of this post

How Uncle Sam Treats ETFs and ETNs

As the timer to file one’s taxes continues to tick away, it is important to understand how exchange traded funds (ETFs) and exchange traded notes (ETNs) can increase or decrease Uncle Sam’s portion of the pie.

With the vast array of ETFs to choose from, taxes can get tricky.  In general the tax treatment of ETFs is relatively simple and is applicable to long-term and short-term capital gains rules and rates.  For example if one held the SPDY (SPY) for less than one year, any gains would be subject to short-term capital gains rates and if held for longer than one year, then the gains would be subject to long-term capital gains rates. Read more of this post

ETFs and ETPs Pass $1 Trillion Mark

According to a study conducted by BlackRock, assets in US listed ETFs and exchange traded products surpassed $1 trillion for the first time on Thursday. 

Over the past year, ETFs have truly penetrated the investment world as both retail and institutional investors have turned to them to access hard to reach markets and add diversification to portfolios.  At the end of 2009, there were 772 US listed ETFs with assets of $705.5 billion from 29 different providers being offered on two exchanges.  So far, this year, 171 new ETFs have been launched in the US, 828 remain in the pipeline and 49 have been delisted.  As a result, there are currently 894 ETFs with assets of $887.2 billion from 28 providers on two exchanges and 185 ETPs, which includes ETNs, with assets of $115.5 billion from 20 providers on one exchange.  Read more of this post

Understanding Closed End Funds (CEFs)

A closed-end fund is a publicly traded investment company that invests in a variety of securities such as stocks and bonds. The fund raises capital primarily through an initial public offering (IPO). CEF shares and the proceeds are invested according to the fund’s investment objectives. “Closed” refers to the fact that, once the capital is raised, there are typically no more shares available from the fund sponsor and the issuance of new shares is closed to investors. Read more of this post

Four Causes Of ETF Discounts and Premiums

An exchange traded fund (ETF) is a basket of securities which can be bought and sold on an intraday securities exchange. Ideally, ETFs would track a specific index such as the S&P 500, Nasdaq 100, Russell 1000 or MSCI without deviation; however, tracking errors do occur.

Tracking errors in ETFs occur when there is difference between the aggregate market value of the holdings of the ETF and the traded share price of the ETF, which can cause an ETF to trade at a discount or a premium.  One reason this deviation occurs is due to the internal expenses charged by ETFs and the costs that are associated during the creation/redemption process.  Read more of this post