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By Jeremy Glaser | 02-17-2010 11:56 AM

ETFs to Help Beat the Taxman

How stock, bond, commodity, and TIPS ETFs and ETNs can relieve the tax burden.

Jeremy Glaser: ETFs to beat the taxman. I'm Jeremy Glaser with Morningstar.com. I'm here today with director of ETF research Scott Burns to talk about some ETFs that can help keep your portfolio tax efficient.

Scott, thanks for joining me today.

Scott Burns: Jeremy, thanks for having me.

Glaser: So in general, ETFs, tax-efficient investments?

Burns: First of all, when you asked me to talk about ETFs that help beat the taxman, the first answer is that ETFs themselves are inherently more tax efficient than most other fund vehicle structures.

That has to do with the creation-redemption mechanism that they have, so they're able to wash out a lot of the capital gains. So they don't eliminate your tax burden, but they do allow you to manage it.

For most ETFs, especially the vanilla ones, the only time you're going to make a cap gains kind of tax payment is when you actually choose to sell the ETF, not at the end of the year.

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