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Comparing Tax-Efficiency of ETFs with Mutual Funds

Now that many exchange-traded funds (ETFs) have a track record of several years, Dan Culloton explores whether or not they have been more tax-efficient than comparable, typical conventional mutual funds in this article from Morningstar.com. He finds the answer is generally yes, but there are some exceptions which he details in the article, which also includes a good review on why ETFs should be more tax-efficient than traditional mutual funds. Culloton concludes that, "In most cases ETFs are more tax efficient than conventional mutual funds in the same asset classes or categories. Nevertheless, ETFs can surprise you. We'd be wary of those tracking benchmarks that require a lot of turnover..."