Author Description

Index ETFs (exchange-traded funds) are famous for their low cost. They are also promoted as being tax efficient. Indeed, they are typically more tax-efficient than their mutual fund counterparts. But the questions are: Are they generally tax-efficient? How should one measure the tax inefficiencies of index ETFs for a typical investor? How do index ETFs in a taxable account compare to other investment accounts on an after-tax and after-cost basis? This book aims to provide a comprehensive and quantitative analysis of some representative index ETFs, based on various income and capital gains tax rates for investors in the United States. It also tries to address some fundamental issues in tax planning using rigorous analysis. There are different kinds of accounts that may be used for tax-advantaged investment, such as pretax IRA (individual retirement account) and 401k, Roth IRA and 401k, HSA (health savings account), cash value life insurance, and taxable brokerage accounts. Which one is better, under what circumstances? How should one quantify the criteria under which one account is better than another on an after-tax and after-cost basis? This book answers these questions quantitatively, with mathematical rigor and data analysis. A dinner may cost more than this book, but this book could help many investors save 6 digits or more in taxes over the long term.