Don't skip opportunities to improve portfolio tax efficiency using ETFs

How can active ETFs be used to pursue more tax efficient portfolios?

Identify tax loss harvesting1 opportunities

Construct fee-based models

Rebalance portfolios

Consider investing excess cash in ETFs

Reinvest dividends into ETFs

  • 45%* of mutual funds paid capital gain distributions
  • 4%* of ETFs paid capital gain distributions
  • 0%* of Capital Group active ETFs paid capital gain distributions

The active evolution of ETFs


Don't skip opportunities to tax-loss harvest with ETFs.

3 basic steps:

Step 1

Identify long-term and short-term gains and losses in the portfolio.

Step 2

Mind the wash sale rule2 so the capital losses are recognized for tax purposes.

Step 3

Consider replacing investments with ETFs to potentially improve the tax efficiency of the portfolio.


Using ETFs to pursue greater tax efficiency

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Identify funds that have the potential to realize the greatest losses for tax purposes.


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ETF tax efficiency, explained

Hint: the ETF’s structure makes it possible

Active ETFs can be as tax efficient as passive

It’s not true that only passive ETFs offer tax advantages

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*Source: Morningstar. Data as of December 31, 2022, the latest available data regarding annual capital gains distributions as of September 2023.

Tax-loss harvesting involves selling an investment that has lost value (from the price the investor originally paid for it) to create a capital loss that can be used to offset capital gains on another investment, either now or in the future.

The Internal Revenue Service’s wash-sale rule regulates the timing around how quickly a substantially identical security can be purchased after the underperforming asset was sold to realize a tax benefit from tax-loss harvesting.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Capital Group exchange-traded funds (ETFs) are actively managed and do not seek to replicate a specific index. ETF shares are bought and sold through an exchange at the then current market price, not net asset value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV when traded on an exchange. Brokerage commissions will reduce returns. There can be no guarantee that an active market for ETFs will develop or be maintained, or that the ETF's listing will continue or remain unchanged.
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