No matter who you are, your investment goals are likely to be similar to the rest of ours: you want to grow your money.
One of the reasons ETFs have become so popular is that they make it simple and inexpensive to build a portfolio that fits individual investing goals. ETFs typically have lower management fees and can be more tax efficient than active mutual funds, for a lower overall cost. Those savings mean more money working in your portfolio—which can translate into significantly higher earnings over time. And unlike the markets, costs are one thing investors have more control over.
The following charts show you what those savings can mean.
When it comes to fees and taxes, there’s a big difference between iShares ETFs and the average active mutual fund. That difference compounds the longer you invest.
As you can see in this chart, the loss in returns—from costs alone—can total almost $60,000 over ten years.
ETFs are tax efficient because they typically distribute fewer capital gains than active mutual funds. That’s largely because ETFs have little turnover and generate fewer taxable events than an actively managed mutual fund would. The difference can be particularly pronounced for certain asset classes.
Regardless of your investment strategy or goals, costs matter. Consider reviewing your portfolio to see whether taxes and fees are a drag on your bottom line. Visit the iShares.com Tax Center to learn more about what helps make ETFs a tax-smart investment approach.
This article was produced on behalf of iShares by Quartz Creative and not by the Quartz editorial staff.
Visit www.iShares.com or www.BlackRock.com to view a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principle.
For more information on the differences between ETFs and mutual funds, click here.
The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations.
Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders. Certain traditional mutual funds can also be tax efficient.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
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