Additionally, investors may wonder how capital gains on stock and bond ETFs are treated.
Both stock and bond ETFs are taxed just as the underlying stocks or bonds would be. Consequently, for taxpayer’s subject to the new Net Investment Income tax, a 3.8% surtax with adjusted gross income over threshold limits, the maximum tax on long-term gains is 23.8% and a maximum 43.4% for short-term gains, according to Michael Iachini, Managing Director of ETF Research at Charles Schwab Investment Advisory.
Lastly, since ETFs track an underlying basket of securities, some investors have wondered if it were possible to track the net asset value the ETF’s quote.
Every ETF has a second ticker that shows price movements on the underlying basket of holdings, allowing individuals to execute trades on a better informed investment decision. Looking up the intraday net asset value, or INAV, by sticking the “.IV” at the end of an ETF’s ticker, investors can see price movements on the underlying index calculated at 15-second intervals throughout the day. [How to Know You’re Getting the Best Price on ETF Trades]
For more information on ETFs, visit our ETF 101 category.