DIVIDENDS AND TAX
Best ETFs for capital gains over dividends? Building my core ETF portfolio
Hey everyone! I'm finally starting to build my core ETF portfolio. I've been investing in individual stocks for over 10 years but feel it’s time to focus on ETFs for the long term. With less time to research stocks and a few bad picks along the way, ETFs seem like a better fit now. I’m looking at simple options like ETFs by Vanguard or similar ones that cover key areas (e.g., Australian and international shares). Has anyone found a specific ETF whose distributions tax wise are generally more capital gains weighted? I’d prefer to offset some carried-forward losses rather than having dividend distributions that I will be taxed on. VAS and portfolio options like VDHG look solid for their low fees and good performance, but as far as I can see don't generally distribute a larger capital gains portion? If there isn't any one etf ot two standing out then so be it. I just thought I’d ask!
Mia Evans.
29 October 2024
1 Comments
about 2 months ago
Hello!
It’s great to hear that you’re considering transitioning to ETFs for your core portfolio, especially after a decade of investing in individual stocks. ETFs can indeed offer a more hands-off investment approach, which might be more suitable given your current preference for less research-intensive options.
Regarding your query about ETFs that are more capital gains focused, it’s true that many popular ETFs like VAS (Vanguard Australian Shares ETF) and VDHG (Vanguard Diversified High Growth Index ETF) primarily distribute income through dividends rather than capital gains. These ETFs are structured to provide regular income streams, which might not align perfectly with your strategy to utilize carried-forward capital losses.
However, you might want to consider looking into ETFs that specifically focus on growth rather than income. These types of ETFs typically reinvest the earnings they generate rather than distributing them, which can lead to higher capital gains. ETFs that track growth indices or sectors known for reinvestment rather than high dividend payouts (like technology or healthcare) might be more aligned with your needs.
For instance, ETFs that track the NASDAQ-100 or other technology-heavy indices might be more likely to accumulate value through capital appreciation rather than through dividends. While these might not explicitly distribute more capital gains, the nature of their holdings tends to lead to higher price appreciation, which could be realized as capital gains when you decide to sell shares.
It’s important to carefully review the distribution policies and historical performance of any ETF you consider adding to your portfolio. Additionally, understanding the tax implications of your investments is crucial, and consulting with a tax professional could provide tailored advice that aligns with your specific financial situation.
Pearler offers a platform that could be very useful in your transition to ETF investing. With features that foc
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