Tax consequences can be significant and are often underappreciated. In 2018, 62% of mutual funds paid capital gains distributions resulting in tax liabilities while 5% of ETFs paid capital gains in the same year.1 Investors seeking to improve the tax efficiency of their portfolios can look to exchange traded funds (ETFs).
Resources to help improve tax efficiency
The iShares advantage
While ETFs are generally more tax-efficient than traditional mutual funds, some ETF providers have been more effective than others in reducing capital gains distributions.
Percentage of funds that paid capital gains distributions over the past 5 years²
Our technology, scale and commitment to quality set iShares apart in building tax-efficient ETFs.
2019 capital gains distributions
In 2019, 95% of iShares ETFs did not distribute capital gains. For more details, access our 2019 capital gains distributions.
1 Source: Morningstar as of 12/31/18. Represented by the oldest share class of each Open-End Mutual Fund available in the United States that incepted on or before 10/31/18.
2 Source: Morningstar as of 12/31/18. Average number of mutual funds that paid a capital gain distribution each year over 5 years. Universe includes all U.S. open ended mutual funds, oldest share class used. Universe includes all funds incepted before 10/31 in each year and excludes funds that closed before 10/31 in each year. Past distributions are not indicative of future distributions.
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares Fund and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
Transactions in shares of ETFs may 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.
Investment comparisons are for illustrative purposes only. To better understand the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is important to read the products' prospectuses.
This material does not constitute any specific legal, tax or accounting advice. Please consult with qualified professionals for this type of advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations.
The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, "BlackRock").
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