Row 7861

Row ID: 7861 | Dataset Entry | Axioma AXP Content Repository

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Hi community!

Newby here, I'm reading a lot and learning. Sorry if this is a very basic question... I am confused with the Morningstar Tax Cost ratio of a fund or ETF. Is it:

A) The % of your earnings that you have to pay in taxes (assuming high tax bracket, etc etc)

b) The % amount by which the ETF effective return is reduced.

To put it in an example. Say I invest $ 100 into an ETF that had a return of 50% and a Tax Cost ratio of 2 % , for a year.

At the end of the year, I sell it and now I have $ 150.

If Tax Cost ratio is A) then I made $ 50 on my investment. 2 % of 50 is 1. So after taxes, I really made $ 49

If Tax Cost ratio is B) then the ETF instead of having a return of 50% in a year, it will have a return of 48 % (50-2). So after taxes, I really made $ 48

So what is it? Thanks!

Gonzchi

FieldValue
text Hi community! Newby here, I'm reading a lot and learning. Sorry if this is a very basic question... I am confused with the Morningstar Tax Cost ratio of a fund or ETF. Is it: A) The % of your earnings that you have to pay in taxes (assuming high tax bracket, etc etc) b) The % amount by which the ETF effective return is reduced. To put it in an example. Say I invest $ 100 into an ETF that had a return of 50% and a Tax Cost ratio of 2 % , for a year. At the end of the year, I sell …
label r/investing
dataType post
communityName r/investing
datetime 2024-05-17
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Raw Record

{
  "text": "Hi community!\n\nNewby here, I'm reading a lot and learning.  Sorry if this is a very basic question...  \nI am confused with the Morningstar Tax Cost ratio of a fund or ETF.   Is it:\n\nA)  The % of your earnings that you have to pay in taxes (assuming high tax bracket, etc etc)\n\nb)  The % amount by which the ETF effective return is reduced.\n\nTo put it in an example.  Say  I invest $ 100 into an ETF that had a return of 50%  and a Tax Cost ratio of 2 % ,  for a year.\n\nAt the end of the year, I sell it and now I have $ 150.\n\n  \nIf Tax Cost ratio is A)   then I made $ 50 on my investment.   2 % of 50 is 1.   So after taxes, I really made $ 49\n\nIf Tax Cost ratio is B)  then the ETF instead of having a return of 50% in a year, it will have a return of 48 %    (50-2).     So after taxes,  I really made $ 48\n\nSo what is it?   Thanks!\n\nGonzchi",
  "label": "r/investing",
  "dataType": "post",
  "communityName": "r/investing",
  "datetime": "2024-05-17",
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}
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