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Thread: Some Portfolio strategies with ETFs
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Old 05-20-2022, 04:28 PM
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Originally Posted by CoachKandSportsguy View Post
Toph,

can you elaborate on this issue, as I am wondering what I am missing. . .

thanks!
Perhaps I am painting all ETF’s with a broad brush, but the couple that I have owned sell a portion of my shares every month to pay the management fees (unlike how mutual funds work) which generate 12 annual capital gains/losses per fund that have to be reported for tax purposes. These sales are considered non-covered shares which means the cost basis is not reported to either the ETF investors or the IRS. Instead, the burden of proving the correct cost basis falls on the ETF shareholders, which can be a major pain in the a$$ if you invest in the ETF during different time periods and/or automatically reinvest dividends and or income back into the fund. Because of the hassle/inconvenience of this along with the fact I can typically invest in mutual funds giving me substantially the same exposure, I won’t invest in ETF’s in a taxable account. Hopefully that explanation clarifies my previous statement.