While ETFs/ETNs and mutual funds are known for their potential tax-efficiency and higher “qualified dividend income” (QDI) percentages, there are asset classes within these investment vehicles or holding periods that do not benefit.
Shorter holding periods, as well as commodities and currencies (which may be an underlying holding of an ETF, ETN or mutual fund), may be considered “non-qualified” under certain tax code provisions. We consider a holding’s QDI when tax-efficiency is an important aspect of the client’s portfolio.