Investing in ETFs | Low-cost & tax-efficient ETFs | Fidelity (2024)

Free commission offer applies to online purchase of ETFs in a Fidelity retail account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal).

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses.

Investing in bonds involves risk, including interest rate risk, inflation risk, credit and default risk, call risk, and liquidity risk.

Diversification and asset allocation do not ensure a profit or guarantee against loss.

FBTC is not an investment company registered under the Investment Company Act of 1940 (the "1940 Act") and is not subject to regulation under the Commodity Exchange Act of 1936 (the “CEA”). As a result, shareholders of FBTC do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or the protections afforded by the CEA.

Digital assets are highly volatile, and their market movements are very difficult to predict. Various market forces may impact their value including, but not limited to, supply and demand, investors’ faith and their willingness to purchase it using traditional currencies, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates, an evolving legislative and regulatory environment in the U.S. and abroad, and other economic trends. Investors also face other risks, including significant and negative price swings, flash crashes, and fraud and cybersecurity risks. Digital assets may also be more susceptible to market manipulation than securities.

The performance of FBTC will not reflect the specific return an investor would realize if the investor actually purchased bitcoin. Investors in FBTC will not have any rights that bitcoin holders have and will not have the right to receive any redemption proceeds in bitcoin.

1.

Source: BlackRock, as of 10/31/2023. Market leader based on market share, number of ETFs, and $2.2 trillion in assets under management as of 10/31/2023.

2. The Fidelity ETF Screener is a research tool provided to help self-directed investors evaluate these types of securities. The criteria and inputs entered are at the sole discretion of the user, and all screens or strategies with preselected criteria (including expert ones) are solely for the convenience of the user. Expert Screeners are provided by independent companies not affiliated with Fidelity. Information supplied or obtained from these Screeners is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell securities, or a recommendation or endorsem*nt by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy or approach to screening or evaluating stocks, preferred securities, exchange-traded products, or closed-end funds. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from its use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation, and other individual factors, and reevaluate them on a periodic basis.

Certain data elements and certain thematic screens are provided by independent companies not affiliated with Fidelity and the views and values reflected therein may not be reflective of Fidelity's views

For iShares® ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares®ETFs and inclusion of iShares®funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF’s prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares®are registered trademarks of BlackRock Inc., and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

Before investing in any exchange-traded product, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

Investing in ETFs | Low-cost & tax-efficient ETFs | Fidelity (2024)

FAQs

Are ETFs really more tax-efficient? ›

ETFs are generally considered more tax-efficient than mutual funds, owing to the fact that they typically have fewer capital gains distributions. However, they still have tax implications you must consider, both when creating your portfolio as well as when timing the sale of an ETF you hold.

Is investing in ETFs a good idea? ›

ETFs make a great pick for many investors who are starting out as well as for those who simply don't want to do all the legwork required to own individual stocks. Though it's possible to find the big winners among individual stocks, you have strong odds of doing well consistently with ETFs.

Do you have to pay taxes on ETFs? ›

Dividends and interest payments from ETFs are taxed similarly to income from the underlying stocks or bonds inside them. For U.S. taxpayers, this income needs to be reported on form 1099-DIV. 2 If you earn a profit by selling an ETF, they are taxed like the underlying stocks or bonds as well.

Which ETF is best for a taxable account? ›

Top Tax-Efficient ETFs for U.S. Equity Exposure
  • iShares Core S&P 500 ETF IVV.
  • iShares Core S&P Total U.S. Stock Market ETF ITOT.
  • Schwab U.S. Broad Market ETF SCHB.
  • Vanguard S&P 500 ETF VOO.
  • Vanguard Total Stock Market ETF VTI.

How to avoid capital gains tax on ETFs? ›

One way to minimize tax liabilities on REIT ETF investments is to hold them in a tax-advantaged account, such as an IRA or 401(k). In these accounts, you can buy and sell investments without incurring any tax liability until you withdraw the funds.

What are the cons to ETFs? ›

Disadvantages of ETFs
  • Trading fees.
  • Operating expenses.
  • Low trading volume.
  • Tracking errors.
  • The possibility of less diversification.
  • Hidden risks.
  • Lack of liquidity.
  • Capital gains distributions.

What's the best ETF to buy right now? ›

The best ETFs to buy now
Exchange-traded fund (ticker)Assets under managementYield
Vanguard Dividend Appreciation ETF (VIG)$76.5 billion1.8%
Vanguard U.S. Quality Factor ETF (VFQY)$333.3 million1.3%
SPDR Gold MiniShares (GLDM)$7.4 billion0.0%
iShares 1-3 Year Treasury Bond ETF (SHY)$24.4 billion3.2%
1 more row

What are the best 3 ETF portfolios? ›

These three ETFs--SPY, QQQ, and IWM--provide investors with a diversified approach to the stock market, covering the spectrum from large-cap stability to tech innovation to small-cap growth. They cater to investors aiming for a balanced investment portfolio that taps into various market segments.

Is ETF good for beginners? ›

The low investment threshold for most ETFs makes it easy for a beginner to implement a basic asset allocation strategy that matches their investment time horizon and risk tolerance. For example, young investors might be 100% invested in equity ETFs when they are in their 20s.

How long should you hold ETFs? ›

Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.

What are the tax risks of ETFs? ›

For ETFs held more than a year, you'll owe long-term capital gains taxes at a rate up to 23.8%, once you include the 3.8% Net Investment Income Tax (NIIT) on high earners.

Is an ETF better than a mutual fund? ›

ETFs and index mutual funds tend to be generally more tax efficient than actively managed funds. And, in general, ETFs tend to be more tax efficient than index mutual funds. You want niche exposure. Specific ETFs focused on particular industries or commodities can give you exposure to market niches.

What is a tax-efficient ETF? ›

Exchange traded notes (ETNs)

The most tax efficient ETF structure are exchange traded notes. ETNs are debt securities guaranteed by an issuing bank and linked to an index. Because ETNs do not hold any securities, there are no dividend or interest rate payments paid to investors while the investor owns the ETN.

Which fund is most tax-efficient? ›

Index mutual funds & ETFs

Index funds—whether mutual funds or ETFs (exchange-traded funds)—are naturally tax-efficient for a couple of reasons: Because index funds simply replicate the holdings of an index, they don't trade in and out of securities as often as an active fund would.

Are ETF fees tax deductible? ›

However, like fees on mutual fund, those paid on ETFs are indirectly tax deductible because they reduce the net income flowed through to ETF investors to report on their tax returns. Other non-deductible expenses include: Interest on money borrowed to invest in investments that can only earn capital gains.

Are real estate ETFs tax-efficient? ›

Tax Efficiency: ETFs are tax efficient due to the ``in-kind'' creation and redemption process. This can result in fewer capital gains distributions compared to mutual funds.

What is the biggest advantage of an ETF over other funds? ›

Positive aspects of ETFs

The 4 most prominent advantages are trading flexibility, portfolio diversification and risk management, lower costs versus like mutual funds, and potential tax benefits.

Is qqq tax-efficient? ›

And while the QQQ does pay a dividend, it's small, with a 12-month distribution rate of 0.83%. The tax effects of that small yield are inconsequential even to higher earners. All in all, the QQQ's represent one of the best ETFs to get equity exposure and lower taxes.

Do ETFs outperform stocks? ›

Small and mid-cap ETFs tend to outperform the S&P 500 in the long-term because the underlying companies are much smaller in size and because their growth prospects are generally higher. However, their risks and volatility are also higher.

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