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? ›

If you're looking for an easy solution to investing, ETFs can be an excellent choice. ETFs typically offer a diversified allocation to whatever you're investing in (stocks, bonds or both). You want to beat most investors, even the pros, with little effort.

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? ›

25 Top Picks for Tax-Efficient ETFs and Mutual Funds
  • Vanguard Interm-Term Tx-Ex Adm. (VWIUX)
  • Vanguard Tax-Managed Small Cap Adm. (VTMSX)
  • Vanguard Total Stock Mkt Idx Adm. (VTSAX)
  • Schwab International Equity ETF™ (SCHF)
  • iShares Core MSCI Total Intl Stk ETF. (IXUS)

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.

Are JEPI dividends qualified? ›

Rather than 0%, 10%, 15%, 20%, or 23.8% tax rates, as is the case with qualified dividends, just 15% to 20% of JEPI's dividends are qualified. This means owning it in a tax-deferred retirement account is optimal. The effective JEPI tax rate for high-income investors is close to 50% if owned in taxable accounts.

Should I put all my money in ETFs? ›

You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.

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

The best ETFs to buy now
Exchange-traded fund (ticker)Assets under managementExpenses
Vanguard Dividend Appreciation ETF (VIG)$76.5 billion0.06%
Vanguard U.S. Quality Factor ETF (VFQY)$333.3 million0.13%
SPDR Gold MiniShares (GLDM)$7.4 billion0.10%
iShares 1-3 Year Treasury Bond ETF (SHY)$24.4 billion0.15%
1 more row

Are ETFs safe for retirement? ›

With their diversified portfolios and flexibility, ETFs offer exposure to a wide range of assets while mitigating risk. By implementing strategies such as asset allocation, sector rotation, and dividend investing, you can maximize returns and minimize risk in your retirement plan.

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. If you hold the ETF for less than a year, you'll be taxed at the ordinary income rate.

Is an ETF better than a mutual fund? ›

The choice comes down to what you value most. If you prefer the flexibility of trading intraday and favor lower expense ratios in most instances, go with ETFs. If you worry about the impact of commissions and spreads, go with mutual funds.

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.

How to be a tax-efficient investor? ›

Choosing investments with built-in tax efficiencies, such as index funds—including certain mutual funds and ETFs (exchange-traded funds)—is one way to minimize the tax drag on your returns. ETFs may offer an additional tax advantage. The way their transactions settle allows them to avoid triggering some capital gains.

What is the tax drag on ETFs? ›

Tax Drag is defined as the reduction of a portfolio's annualized return due to taxes. It's the tax liability triggered by distributions and capital gains in a non-qualified account.

Are real estate ETFs tax-efficient? ›

Tax implications of dividends: REIT ETFs are required to distribute at least 90% of their taxable income as dividends to investors. These dividends are taxed at the investor's ordinary income tax rate, which can be as high as 37%. However, qualified dividends, which meet certain requirements, are taxed at a lower rate.

Do ETFs outperform the market? ›

ETFs are most often linked to a benchmarking index, meaning that they are often not designed to outperform that index. Investors looking for this type of outperformance (which also, of course, carries added risks) should perhaps look to other opportunities.

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

ETFs have several advantages for investors considering this vehicle. The 4 most prominent advantages are trading flexibility, portfolio diversification and risk management, lower costs versus like mutual funds, and potential tax benefits.

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