Tax Efficiency of Vanguard ETFs Follow Up

Last week I had mentioned that Vanguard ETFs had slightly different tax considerations than most other ETFs due to their unique structure (they are actually a separate share class of Vanguard index mutual funds.) Larry MacDonald from Canadian Business Magazine has added some more information to the mix in his most recent blog post. He even provides a short side by side comparison of the capital gains distributions of a traditional ETF and the Vanguard commensurate ETF. The differences are quite large in some cases/years.

There were also some follow up questions on my original blog post, the answers to which may be of interest to other readers so I’m including it here for your reference. A reader had asked if there was any way to figure out the unrealized capital gains liability that has accrued in any one Vanguard ETF. And there is. The answer can be sourced directly from Vanguard’s website. Just click on the fund in question, then select the “Distributions” tab and you’ll find a line that says “Unrealized appreciation/depreciation”. Right below that is the amount as a percentage of the NAV. For example, for VWO (which is a share class of VEIEX, the index mutual fund) here is the link.

Preet Banerjee
Preet Banerjee an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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  • Henry

    So for situations where tax concerns do not exist such as endowments and tax deferred accounts, Vanguard ETFs’ tax structure does not matter.

    I am just wondering if you know about special institutional rebates that Blackrock Global Investors give to institutions that invest in iShares.

    EEM is the most obvious example with a MER of .72% vs VWO’s .27%. My impression is that various endowment funds that use EEM over VWO has some form of institutional rebate of the MER.

  • Josephine Mckendree

    Just wanted to say thank you for a really useful site. Interesting resource! cheers mate!