- CFA Exams
- CFA Exam: Level I 2021
- Study Session 18. Portfolio Management (1)
- Reading 51. Portfolio Management: An Overview
- Subject 4. Pooled Investments
CFA Practice Question
Which of the following least accurately completes the following sentence? ETFs are generally more tax efficient than open-end funds ______
II. because investors can choose the timing of recognition for capital gains and losses.
III. because investors are not subject to involuntary distributions due to trading by other investors.
IV. because dividends are immediately reinvested.
I. due to the way they are structured legally.
II. because investors can choose the timing of recognition for capital gains and losses.
III. because investors are not subject to involuntary distributions due to trading by other investors.
IV. because dividends are immediately reinvested.
Correct Answer: IV
The others are all reasons why ETFs are considered relatively more tax efficient than open-end funds. Immediate reinvestment of dividends may improve performance, but it is not related to tax considerations.
User Contributed Comments 4
| User | Comment |
|---|---|
| magicchip | aargh... again, must read questions carefully. |
| Hervz | Lol.. me too |
| khalifa92 | Sometimes you choose an answer cause subconsciously you relate to it. |
| joeclark | I remember that Cap G/L does not matter for ETF. Kindly check. |