Bond ETFs Don’t Keep the Taxman Away

Despite their structural tax advantages, bond ETFs can still expose investors to significant tax liabilities.

Jan 24, 2018

Mentioned: ProShares Inflation Expectations (RINF) , WisdomTree Interest RtHdgUS Aggt Bd ETF (AGZD) , iShares MBS ETF (MBB) , Vanguard Short-Term Bond ETF (BSV)

This article is part of Morningstar's Guide to Passive Investing special report.

While equity exchange-traded funds have a clear edge over actively managed stock funds on tax efficiency, the picture is slightly different for fixed-income funds. Here, I'll discuss some of the important issues investors should keep in mind when assessing the tax efficiency of fixed-income ETFs.

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Phillip Yoo does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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