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.

Spot crypto ETPs, such as FBTC and FETH, are not investment companies registered under the Investment Company Act of 1940 (the “1940 Act”) nor are they commodity pools under the Commodity Exchange Act of 1936 (the “CEA”). As a result, shareholders of spot crypto ETPs do not have the protections associated with ownership of shares in a registered investment company nor are shareholders afforded the protections of investing in an CEA-regulated instrument or commodity pool.

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 each fund or funds will not reflect the specific return an investor would realize if the investor actually purchased cryptocurrency. Investors in either fund will not have any rights that cryptocurrency holders have and will not have the right to receive any redemption proceeds in the underlying cryptocurrency.

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

Is it a good idea to invest in ETFs? ›

For most individual investors, ETFs represent an ideal type of asset with which to build a diversified portfolio. In addition, ETFs tend to have much lower expense ratios compared to actively managed funds, can be more tax-efficient, and offer the option to immediately reinvest dividends.

Do you pay taxes on ETFs every year? ›

If you sell shares in most ETFs within a year, any profits are taxed as a short-term capital gain. ETFs held for longer are considered long-term gains and given a lower rate. If you sell an ETF and buy the same (or a substantially similar) ETF after less than 30 days, you may be subject to the wash sale rule.

Do mutual funds tend to be more tax-efficient than ETFs? ›

Is an ETF more tax-efficient than a mutual fund? In terms of capital gains and losses and dividends, tax law treats these the same for ETFs and mutual funds. However, one benefit of ETFs is that they often encounter fewer taxable events. Because ETFs trade on an exchange, they transfer from one investor to another.

What are the tax disadvantages 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.

How can you make money by investing in ETFs? ›

Dividend-paying equity ETFs offer potential capital gains from increases in the prices of the stocks your ETF owns, plus dividends paid out by those stocks. Bond fund ETFs may provide more reliable interest income from investments held in government bonds, agency bonds, municipal bonds, corporate bonds, and more.

What are the top 5 ETFs to buy? ›

Top 7 ETFs to buy now
ETFTickerDescription
Vanguard S&P 500 ETF(NYSEMKT:VOO)Fund that tracks the S&P 500
Invesco QQQ Trust(NASDAQ:QQQ)Fund that tracks the Nasdaq 100
Vanguard Growth ETF(NYSEMKT:VUG)Invests in large-cap U.S. growth stocks
iShares Core S&P Small-Cap ETF(NYSEMKT:IJR)Fund that tracks the S&P SmallCap 600 Index
3 more rows

What is the downside of owning an ETF? ›

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

Can I withdraw ETFs anytime? ›

ETFs Offer Liquidity

ETF owners benefit from liquidity as well as broad diversity in their mutual fund portfolio. There is no lock-in since they are open-ended funds providing you with the option of withdrawing your assets as needed.

How long should you hold an ETF? ›

More Long-term Capital Gains

Low turnover often means a longer holding period for each of the underlying investments. ETFs generally hold underlying securities longer than 12 months, which usually qualifies any gains that are realized for favorable long-term capital gains tax rates.

Do ETFs have monthly fees? ›

ETF fees are accrued daily, which means they are reflected in the daily price of an ETF; however, the fees are typically deducted from fund assets on a monthly basis. From the investor's perspective, ETF fees are not directly paid like a monthly bill. Instead, they are reflected in a fund's net return.

Should you invest in ETF every month? ›

The second advantage is simple: You'll make more money. By investing the same dollar amount in an ETF every month you will accumulate more units at a low price and fewer units at a high price. Over time, this approach can pay off handsomely, as long as you stick to it.

Which ETF is most tax-efficient? ›

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.

Is Voo better than Spy? ›

SPY is more expensive with a Total Expense Ratio (TER) of 0.0945%, versus 0.03% for VOO. SPY is up 20.32% year-to-date (YTD) with -$19.07B in YTD flows. VOO performs worse with 18.7% YTD performance, and +$48.81B in YTD flows.

Are Vanguard ETFs more tax-efficient? ›

And because of the way they trade, ETFs may have an additional tax benefit. When you sell shares of an ETF, you're selling to another buyer as opposed to the fund company. This means the fund itself usually isn't involved in the transaction and doesn't have to sell any securities, potentially triggering capital gains.

Is Voo or VTI more tax-efficient? ›

Since VTI and VOO are both ETFs, they have the same trading and liquidity, tax efficiency, and tax-loss harvesting rules. There are two key differences between VOO and VTI: the diversification strategy and performance. VOO invests in approximately 500 stocks, while VTI invests in over 3,500.

Is qqq tax-efficient? ›

The fund offers layers of tax efficiency for investors. The options that QQQI uses are call options on the NDX and qualify as section 1256 contracts. These receive favorable tax treatment under IRS rules. The options held at year's end are treated as if sold on at fair market value on the last market day.

Which type of ETF distribution is tax-free? ›

If investors hold ETFs within a tax- sheltered account (RRSP, RRIF, RESP, or TFSA), distributions are not taxed and investors will not receive a tax form. If the ETF is held within a taxable account and has a taxable distribution, the investor can expect to receive a T3 tax form.

Is IVV or VOO better? ›

IVV is less expensive with a Total Expense Ratio (TER) of 0.03%, versus 0.03% for VOO. IVV is up 18.7% year-to-date (YTD) with +$33.29B in YTD flows. VOO performs worse with 18.7% YTD performance, and +$48.81B in YTD flows.

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