What types of ETFs are taxed differently by the IRS?
"Very interesting question. While searching i also found that some precious metal ETFs (including IAU) gains are taxed at 28% because IRS considers it ""collectible"", rather than the usual long term 15% for stocks and stock holding ETFs. As for capital gain tax you have to pay now my guess it's because of the following statement in the IAU prospectus (page 34): When the trust sells gold, for example   to pay expenses, a Shareholder will   recognize gain or loss ...." Investopedia laid out the general information of tax treatment on the ETF fund structures as well as their underlying asset classes: http://www.investopedia.com/financial-edge/0213/how-tax-treatments-of-etfs-work.aspx
It really depends on the hedge fund, my hedge fund gives back all rebates for routes that are public knowledge back to the client. Also the rebate is based on the route, not the stock, so it may not offset all expenses on each ETFs. Most of the BATS IEX and other routes have public websites where you can get the infos on what are the rebates for each. "Appreciation of a Capital Asset is a Capital Gain.   In the United States, Capital Gains get favorable tax treatment after being held for 12 months. From the IRS newsroom: Capital gains and losses are   classified as long-term or short-term,   depending on how long you hold the   property before you sell it. If you   hold it more than one year, your   capital gain or loss is long-term. If   you hold it one year or less, your   capital gain or loss is short-term. The tax rates that apply to net   capital gain are generally lower than   the tax rates that apply to other   income. For 2009, the maximum capital   gains rate for most people is15%. For   lower-income individuals, the rate may   be 0% on some or all of the net   capital gain. Special types of net   capital gain can be taxed at 25% or   28%. The IRS defines a Capital Asset as ""most property you own"" with a list of exclusions found in Schedule D Instructions.  None of the exclusions listed relate to Bond ETFs." "If you only have to pay 23k federal taxes on 100k, that means you are in the long term capital gains tax rate, which is the lower of the tax rates available. First you get your federal income tax marginal tax rate, and then find the matching long term capital gains tax rate. For example, if your marginal federal income tax rate is 28%, your capital gains tax rate would be 15%. Or rather, if the amount of the gain would put you in the 28% rate, then your long term capital gains tax rate is 15%. You can reduce that by having more losses. If you have anything else invested anywhere that is taking a loss, then you can sell that this year and it will offset the other gains you have realized. The only note is that your losses have to be long term capital losses too. Tax loss harvesting takes this to an extreme where you sell something at a loss to lock in the tax loss, but you didn't really want to get rid of that investment, so then you buy a nearly identical investment. ie. if you owned shares of ""Direxion Tech Sector ETF"" and it was at a loss, you would sell that and then immediately buy ""ProShares Tech Sector ETF"", the competing product that does the exact same thing. Then there is charity. This still requires spending money and you not having it any longer. If you feel that a cause can use the money more directly than the US government, you can donate an appreciated asset to the charity - not report a gain and also take a charitable deduction." If you receive dividends on an investment, those are taxed. Vanguard has low cost ETFs that track the S&P 500. The ticker is VOO, its expense ratio is 0.05%, which is pretty low compared to others in the market. Someone correct me if I'm wrong, but you won't have to pay tax on the dividends if it's in a retirement account such as a Traditional(pay taxes when you withdraw) or Roth IRA(pay income/federal/fica etc, but no taxes on withdrawal)... You are still selling one investment and buying another - the fact that they are managed by the same company should be irrelevant.  So yes, it would get the same tax treatment as if they were managed by different companies. You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs.  There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF. Lots of good answers.  I'll try and improve by being more brief.  For each option you will pay different taxes: Index Fund:   Traditional IRA Roth IRA You can see that the Roth IRA is obviously better than investing in a taxable account.  It may not be as obvious that the traditional IRA is better as well.  The reason is that in the traditional account you can earn returns on the money that otherwise would have gone to the government today.  The government taxes that money at the end, but they don't take all of it. In fact, for a given investment amount X and returns R, the decision of Roth vs Traditional depends only on your tax rate now vs at retirement because X(1-tax)(1+R_1)(1+R_2)...(1+R_n) = X(1+R_1)(1+R_2)...(1+R_n)(1-tax) The left hand side is what you will have at retirement if you do a Roth and the right hand side is what you will have at retirement if you do traditional.  Only the tax rate differences between now and retirment matter here.  An index fund investment is like the left hand side but has some additional tax terms on your capital gains.  It's clearly worse than either. Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs?  For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI).  Comparing the two on yahoo finance I find no difference over the last 5 years visually.  For a different pair of funds you may find something very slightly different.   In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy.  I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds.  For this reason I think you should examine your question on a case-by-case basis.  Index fund and ETF returns are all publicly available so you don't have to guess. "I think that any ETF is ""open source"" -- the company issues a prospectus and publishes the basket of stocks that make up the index. The stuff that is proprietary are trading strategies and securities or deriviatives that aren't traded on the open market. Swaps, venture funds, hedge funds and other, more ""exotic"" derivatives are the things that are closed. What do you mean by ""open source"" in this context?" Behind the scenes, mutual funds and ETFs are very similar.  Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate.  Mutual funds and ETFs can both be either managed or index-based,  high expense or low expense, stock or commodity backed. Method of investing When you invest in a mutual fund, you typically set up an account with the mutual fund company and send your money directly to them.  There is often a minimum initial investment required to open your mutual fund account.  Mutual funds sometimes, but not always, have a load, which is a fee that you pay either when you put money in or take money out. An ETF is a mutual fund that is traded like a stock.  To invest, you need a brokerage account that can buy and sell stocks.  When you invest, you pay a transaction fee, just as you would if you purchase a stock.  There isn't really a minimum investment required as there is with a traditional mutual fund, but you usually need to purchase whole shares of the ETF.  There is inherently no load with ETFs. Tax treatment Mutual funds and ETFs are usually taxed the same.  However, capital gain distributions, which are taxable events that occur while you are holding the investment, are more common with mutual funds than they are with ETFs, due to the way that ETFs are structured.  (See Fidelity: ETF versus mutual funds: Tax efficiency for more details.)  That having been said, in an index fund, capital gain distributions are rare anyway, due to the low turnover of the fund. Conclusion When comparing a mutual fund and ETF with similar objectives and expenses and deciding which to choose, it more often comes down to convenience.  If you already have a brokerage account and you are planning on making a one-time investment, an ETF could be more convenient.  If, on the other hand, you have more than the minimum initial investment required and you also plan on making additional regular monthly investments, a traditional no-load mutual fund account could be more convenient and less expensive. "You seem to have it right.  Unless you have a big position, having MLP shares in your IRA will not cause you any tax hassles.  Your IRA will get a Schedule K from the MPL (which may be mailed to you), but you won't need to do anything with that unless you're over the UBI limit.  Last I checked, that was $1000, and you probably won't exceed that. UBI in principle needs to be evaluated every year, so it's not necessarily a ""one-time"" event.  If your IRA does go over the UBI limit, your IRA (not you) needs to file a return.  In that case, contact your custodian and tell them about the Schedule K that you got. See also my answer here: Tax consequences of commodity ETF The question is about commodity ETFs in IRAs, but the part of my answer about UBI applies equally well." Questrade is a Canada based broker offering US stock exchange transactions as well. It says this right on their homepage. ETFs are traded like stocks, so the answer is yes.  Why did you think they only offered funds? "Securities and ETFs are also subjected to Estate Tax.  Some ways: Draft a ""Transfer on Death"" instruction to the broker, that triggers a transfer to an account in the beneficiary's name, in most cases avoiding probate. If the broker does not support it, find another broker.  Give your brokerage and bank password/token to your beneficiary. Have him transfer out holdings within hours of death.  Create a Trust, that survives even after death of an individual.  P.S. ETF is treated as Stock (a company that owns other companies), regardless of the nature of the holdings.  P.S.2 Above suggestions are only applicable to nonresident alien of the US." "As Michael Pryor answered, a bond fund is a mutual fund that invests in bonds. I'd also consider an ETF based on bonds to be a bond fund, but I'm not sure that all investors would consider these as ""bond funds"". Not all bond funds are the same -- just like stock funds. You can classify bond funds based on the issuer of the bonds: You can also classify funds based on the time to maturity: In general, bond funds have lower risk and lower expected return than stock funds. Sometimes bond funds have price movements that are not tightly correlated to the price movements in the equity markets. This can make them a decent hedge against declines in your equity investments. See Michal Pryor's answer for some info on how you can get tax free treatment for your bond fund investments."