Tired of Paying Investment Taxes? There’s an ETF for That

With stocks at record highs and bonds looking expensive, it’s more important than ever for investors to eliminate anything that’s a drag on future returns.

The two heaviest drags are fees and taxes. Market-tracking exchange-traded funds have reduced fees to nearly nothing. And they’ve enabled investors to defer much of the tax drag. New ETFs and other vehicles are aiming to reduce the remaining tax drag to nearly nothing as well.

These funds seek to pass the total return of a market index through to you, and defer tax on it, until you eventually sell the fund. If they can pull it off over the long run—which is a big if—they will stop Uncle Sam from taking a cut every year.