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fabrication and manufacturing companies.

Premiums/Discounts

ETFs sometimes trade at a premium or discount, which can often mean additional costs. For example, if you buy an ETF at a premium and then sell it at a discount, you lose money. In terms of ETF investing, premiums and discounts are understood within the context of the net asset value (NAV), which represents the sum of a fund’s assets minus liabilities, divided by the total number of shares outstanding. If a fund doesn’t trade close to its NAV, there may be issues with its creation/redemption strategy.

Taxes

The total cost of ETF ownership cannot be divorced from the tax implications of investing. ETF portfolios that realize capital gains will be subject to capital gains taxes. ETFs that distribute dividends also have more immediate tax implications whereas non-dividend funds are taxed only when shares are sold. Holding ETFs in a tax-exempt retirement account is a good way of lowering expenses over the long term.