Why I prefer ETFs over Mutual funds

Index based etfs are in general highly tax efficient as compared to it's mutual fund counterpart. It's because ETFs rarely generate any capital gain, even when index's underlying appreciated security is being replaced by another security. For example, VTI has not distributed any capital gain for it's 20 year's history, even though it has produced above 10% annual return during above period. Even during 2019 March selloff, there was no realized capital gain.

For taxable accounts, it's better to own etfs than mutual funds, as taxes on deferred capital gains are deferred in etfs. Also, unlike mutual funds, there is no huge realized capital gains from other investor's panic selling during sharp downturn. There is no real outflow in case of etfs. Sellers sell shares and buyers buy them. Underlying securities remain unchanged.

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