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Can Exchange Traded Funds -ETFs- Save You Money On Taxes? – Forbes

Can you use ETFs to pay less taxes on your investments? How to investment more tax efficiently.

The exchange-traded fund industry has been booming for the past few years. Much of these gains in assets have come at the expense of old-school mutual funds. Some investors have transitioned to ETFs because of lower expense ratios when compared to similar mutual funds. Many wealthier Americans have been guided towards ETFs for their tax efficiency.

Generally speaking, ETFs are more tax-efficient investment vehicles that incur fewer capital gains disbursements than your mutual funds. As a financial planner who loves tax planning, being more tax efficient with your investments is essential to improving net after-tax investment returns without necessarily taking on more investment risk.

When you sell a mutual fund, the fund manager is forced to sell securities in their portfolio to raise cash to fund your redemption. Whereas when you sell an ETF, you sell that investment bucket (within the ETF) to another investor. With the ETF, there is no taxable sale of the underlying holdings. You will still have capital gains (or capital losses) on the sale of the whole ETF.

When an investor exits a mutual fund, the fund’s manager must sell securities to raise cash for redemption. The same investor leaving an ETF can sell their shares to another investor, meaning neither the fund nor its manager has made a taxable transaction.

In 2021, the ETF industry took in about $500 billion of new assets when looking at asset flows. On the flip side, the mutual fund industry lost around $362 billion. While I do see the shift toward ETFs continuing, I don’t think mutual funds are going away any time soon. Many Americans own mutual funds within their workplace retirement plans. For tax-deferred accounts like an IRA, 401(k), or even a Cash Balance Plan, tax efficiency is not an issue for the underlying investments.

You can lose money in a mutual fund and still get hit with substantial capital gains taxes; this is called Phantom Income. As other investors sell their mutual funds’ shares, other owners can get hit with capital gains distributions throughout the year.

In this scenario, you could almost think of this as playing hot potato- someone gets left holding the proverbial bag of hot potatoes- capital gains. Vanguard funds were recently sued for the amount of capital gains a move it made created for owners of their Target Date funds in taxable accounts.

The capital gain distribution was 12.1% of fund assets in 2021. This resulted in substantial tax bills for many of the account holders.

It is rare for ETFs to pass along any capital gains to shareholders. Most active mutual funds will disperse capital gains each year. Before you run out and sell your highly appreciated mutual funds, look at the taxes you would incur to sell. If you have held mutual funds for long periods of time, you may have substantial embedded capital gains. In plain English, it could cost a lot of money to sell out of the funds.

If you have highly appreciated mutual funds, consider turning off the automatic reinvestment of capital gains and dividends. This will allow you to reinvest the future funds more tax efficiently in ETFs. The same would go for future contributions to your account being used to purchase ETFs rather than mutual funds in your taxable investment accounts.
While I don’t have a crystal ball, I do expect taxes to be higher in the future. As your income increases and as tax rates increase, the value of tax planning and tax-efficient investment grows exponentially.

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A 12-Week Money Course Helped Me Raise My Net Worth

“I am here. I am capable. I am wealthy.”
So goes the benediction at the start of every Factora Wealth Circle meeting, held over Zoom since the pandemic but headquartered in Austin. Factora, a women-led company that teaches personal finance in a tangible way, hosts Wealth Circle, a live, online course and community, for 12 weeks, twice a year. Sessions meet every other week on Wednesday nights, with homework in between.

I decided to attend earlier this year after a fellow writer from grad school tipped me off to the program. Now, a month out from my “graduation,” my net worth has increased 29% from when I enrolled.

I sit with my camera on, mic muted, amongst hundreds of other women. Our expressions range from fascination to exhaustion to epiphany. That’s just how it goes when personal finance is the topic du jour.

Our host, Allegra Moet Brantly, Factora’s founder and CEO, finishes the benediction with a bright smile and eager eyes. Looking around the Zoom room, it’s fascinating to consider what brought us all here, to a sort of financial confidence bootcamp for women. As Moet Brantly begins, I pull out my notebook and text my partner to bring me a bar of chocolate as the words “compound interest” in deep burgundy flicker onto the screen. It’s going to be a long night.
“It’s dangerous to find ourselves on auto-pilot,” cautioned Moet Brantly as slides in our third session demonstrated timeless financial principles, like paying yourself first and putting an end to trading time for money. The course also suggested repurposing mindless spending as investing, emphasizing increasing one’s investment rate instead of stressing over the small stuff.

Over the course of the class, I increased my own savings rate from a very auto-pilot-esque 10% to something closer to 30%. The trick for me? Labeling buckets in my high-yield savings account with short-to-mid-term goals. It turns out, when I can see my money’s redirection from Net-a-Porter to a house fund, it feels more satisfying.

Twice during each Wealth Circle, the group was split into random breakout rooms. Here, with little to no context beyond the rectangles on our screens, we shared real numbers, without shame. In one breakout session, we shared our net worths, numbers ranging from the negatives to upwards of a million. Then, we shared our net worth goals. I went first, apprehensive to speak a number higher than I’d ever imagined possible. I watched as the entire group smiled back, nodding, and then proceeded to each offer a number higher than my own. There was something coven-like and moving to feel a group of women encourage me to dream bigger.

But Factora’s not built on dreaming. It’s grounded in straightforward, if not simple, investing principles, like focusing on time in the market over timing the market. The conversation around assets highlighted just how personal things can get in the world of personal finance. As a 26-year-old in Brooklyn, owning property has always been a pipe dream, at best. A sound investment, to me, was a great pair of walking shoes and an unlimited subway card. Hearing women older than me, during breakout groups and as examples during lectures, inspired me to bring a level of creativity to accumulate assets. Sure, buying my apartment might not be my next step, but it was freeing to imagine what might be.

“Money creates opportunity. When you have more money, you’ll have more money and decision-making,” said Moet Brantly during our fourth session on real estate investments. Instead of investing in a home, I took the time to set aside an emergency fund with six months of living expenses. Was it a “sexy” investing move with massive payoff or worthy of bragging about at brunch? No, but it was a way of empowering myself toward decision-making from a place of security and stability.

The changes I’ve made thanks to Wealth Circle haven’t been drastic or dramatic. They’ve been small-scale shifts in the way I think about money, which is a tool toward greater freedom and more choice in the way I live my life.

By the last time we recited the benediction, I found myself believing the three sentences I spoke: “I am here. I am capable. I am wealthy.” Even though it was 8 PM in New York City, I was there. Thanks to my recent hiring of a CPA to sort out my freelancing taxes, I was capable. And because of my newfound confidence in investing, I was wealthy.

Disclosure: This post may highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team. Read our editorial standards.

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Rueda Empire signs $3.7 million deal to further its music career

Three albums and 3.7 million dollars are the basis of the agreement signed in Los Angeles on May 4 to boost Rueda Empire’s musical career. Following the success of the urban artist’s second album, Inefable, this new contract ensures the production and distribution of the artist’s material for the next three years.

It was with great joy that the artist signed this agreement on the eve of the Mexican Heritage holiday, which was a very symbolic moment for him. He assures that doing so on this date is a good omen for his musical career.

Rueda Empire will release his next album this summer, in which he has been working for months in collaboration with Nahuel Lion, from the Canary Islands. On this album, the artists fuse Latin rhythms with urban music such as trap and reggaeton.

The interpreter of “Tú no sabes de eso”, “Quédate”, “Solo amigos”, “Cómo me curo”, among other songs, continues to reap success in his musical career and hopes to continue making his audience dance with good music, contagious rhythms and modern melodies.

To stay up to date with everything that happens in Rueda Empire’s career subscribe to his YouTube channel where he makes all his releases. You can also find him on Spotify and Instagram as @rueda_empire.

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Opinion | Virginia uses tax money in wrong way to lure Washington Commanders stadium – The Washington Post

Localities in the D.C. area are jockeying to land the new stadium planned by the Washington Commanders. But there are a right way and a wrong way to deploy taxpayer dollars in pursuit of it. Maryland is going about it the right way. Virginia is not. The jury is out on the District of Columbia.

Maryland Gov. Larry Hogan, a Republican, made clear that the state would offer no money to help billionaire Daniel Snyder build a stadium to replace Landover’s FedEx Field, which the Commanders plan to vacate in 2027. He got no pushback from lawmakers in Annapolis, who passed a bill authorizing up to $400 million in borrowing — not for a new stadium but to tear down FedEx Field and, more to the point, kick-start a shiny new development in the wasteland nearby. That would help avoid an economic body blow to the local economy should the Commanders leave, and help transform nearby Largo into a plausible downtown for the surrounding locality, Prince George’s County. It would get a $16 million amphitheater, civic plaza, public market, library and other amenities near Metro’s eastern terminus for the Blue and Silver lines.

That’s a smart way for Maryland to tell the Commanders: Hey, we’ll be happy if the team stays put — and we’re willing to upgrade the neighborhood — but we’re not in the business of building stadiums for billionaires who can afford it on their own. What’s more, another National Football League team, the Los Angeles Rams, just won a Super Bowl at SoFi Stadium, their home field, which owner Stan Kroenke built with $5 billion in private funds. If the Rams owner can make do without milking taxpayers, so can Mr. Snyder.

Unfortunately, that lesson seems lost on Virginia. Although no deal has been finalized by state lawmakers in Richmond, they seem prepared to kick in as much as $350 million in state tax revenue for a new stadium for the Commanders. That’s a good deal for Mr. Snyder but not for Virginians.

Granted, it’s much less than the $1 billion in taxes the state originally seemed willing to earmark for the team. Granted, too, Virginia is the most populous state in the nation without a big-league sports franchise; it might be suffering from a case of franchise envy as it gazes across its borders at North Carolina, Tennessee, Maryland and D.C., all of which have plenty. But that is no excuse for profligacy in service to a very rich man.

D.C., for its part, isn’t really in a position to compete for the moment — the federal government owns the only plausible location for a new arena, at the current site of RFK Stadium, and Congress doesn’t look ready to pass legislation to sell it to the city.
Congress’s reluctance is rooted at least partly in justified concerns about Mr. Snyder, the Commanders and the team’s culture, which have been the subject of investigations into sexual harassment and, most recently, financial impropriety over allegations that the team hid and withheld revenue-sharing funds from the NFL. Those probes should serve as a warning: Mr. Snyder and his team are not worthy of public money.

Editorials represent the views of The Washington Post as an institution, as determined through debate among members of the Editorial Board, based in the Opinions section and separate from the newsroom.

Members of the Editorial Board and areas of focus: Deputy Editorial Page Editor Karen Tumulty; Deputy Editorial Page Editor Ruth Marcus; Associate Editorial Page Editor Jo-Ann Armao (education, D.C. affairs); Jonathan Capehart (national politics); Lee Hockstader (immigration; issues affecting Virginia and Maryland); David E. Hoffman (global public health); Charles Lane (foreign affairs, national security, international economics); Heather Long (economics); Molly Roberts (technology and society); and Stephen Stromberg (elections, the White House, Congress, legal affairs, energy, the environment, health care).
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