Matt Tucker Explains Why Taxes Matter


In a low return environment, every dollar counts. Now more than ever, it’s important to consider tax efficiency when building your portfolio.

Some investors are surprised to find that they have to pay taxes on capital gain and dividend distributions from their mutual funds and ETFs, even if they didn’t sell their funds during the year. In fact, over the past 10 years, the average annual tax cost for a mutual fund was 1.3%.1

Think that doesn’t mean much? Taxes can actually cost more than a mutual fund’s expense ratio and can eat into your returns over time.

The cost of taxes shouldn't be ignored

The Cost of Taxes Can't be Ignored

How can you protect yourself?

Not all investments are created equal when it comes to tax efficiency. iShares has a 10-year track record of providing tax-efficient ETFs.

There’s a reason 99% of funds did not pay capital gains tax last year. iShares ETFs have three characteristics that can help you keep more of what you earn.

Why it MattersWhat Makes iShares ETFs Different

Dedicated ETF Structure

When mutual funds buy and sell securities in cash they exchange cash for securities and vice versa. Cash transactions are considered taxable events and can cause funds to incur gains.

iShares ETFs have a dedicated ETF structures, so they can exchange securities for securities and minimize tax consequences.

Portfolio Management

Portfolio managers must build and manage a fund diligently in order to achieve tax efficiency.

iShares portfolio managers constantly assess the risk and tax consequences of each transaction. Delivering on our reputation for low-cost and tax-efficient investments is integral to every decision we make.

Tax Expertise

Fund managers can use a variety of tools to help manage taxes, so it’s important to select a manager with tax expertise.

iShares ETFs benefit from the full power of BlackRock analytics and the iShares’ portfolio management team.

What you should consider now

Take a look at your portfolio to find out where you may be sensitive to taxes and consider adding iShares ETFs.

Buying iShares funds is easy. Here are some ways to get started.

1. Source: Morningstar as of 3/31/14. “Tax Cost” is a Morningstar measure of the impact of taxes on capital gains and income distributions on performance. Averages are calculated using the oldest share class of all actively managed open-end mutual funds available in the U.S. (excluding municipal bond and money market funds) with 10 year track records as of 3/31/14.

2. Source: BlackRock. For illustrative purposes only. Does not include commissions or sales charges or fees.

3. ETFs are subject to a short-term trading fee by Fidelity, if held less than 30 days. Other conditions and fees may apply.

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