Index mutual funds usually pay lower license fees to index providers than ETFs do. Index mutual funds are also less tax efficient. Index mutual funds usually sell securities to satisfy redemptions, which increases taxes. ETFs ordinarily do not engage in taxable events to satisfy redemptions, as the ETF may exchange ETF shares for the underlying. Also, an ETF investor usually sells their ETF shares to another investor, so there is no tax implications for the ETF itself. |
