Financial Opinion and Insights

Taxes Come In All Shapes and Sizes

Jim Lorenzen, CFP®

Jim Lorenzen, CFP®

My thanks to Harold Evensky for the heads-up on this one.  In his newsletter, he cites Jason Zweig’s recent Wall Street Journal Intelligent Invest column, entitled “Watch Out for the Hidden Tax Traps Inside ETFs”  

ETFs are generally very tax efficient and are very low-cost investments, as well, which is one of the reasons I like them so much and do use them in client portfolios; but, in his column, he warns, “… the mad dash in ETFs lately has been into ‘alternative assets’ like currencies and commodities.  The investment researchers at Morningstar track 108 such ETFs… these funds are taxed so differently and at such higher rates than traditional investments, that many investors wish they had looked before they had leaped.” 

According to Zweig, “Wells Fargo Advisors has estimated that many commodity EFTs can be taxed six different ways and currency EFTs in eight!”

It pays to do your homework, doesn’t it?

Written by Jim Lorenzen, CFP®, AIF®

July 29, 2010 at 8:00 am