We’ve all heard the saying, “There are only two certainties in life, and that’s death and taxes.” For investors, the second part of that saying is a big problem. Taxes are one of the biggest determinants of long-term returns, and getting hit by Uncle Sam can significantly impact overall balances. It’s no wonder why tax-deferred or tax-free accounts such as 401(k)s and IRAs are so popular with investors.
However, not everyone has access to these types of accounts, but because of their flexibility, many investors are turning to taxable or regular brokerage accounts to do some, if not all, of their saving.
And the answer to finding tax efficiency is clear. Exchange-traded funds (ETFs) are winning the tax fight versus their mutual funds cousin. The latest data shows just how good ETFs are at preventing and reducing taxes. In the end, if you are concerned with paying Uncle Sam, ETFs are the clear winners.
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