Which of the following financial products is least likely to have a capital gain distribution?
- Exchange traded funds.
- Open-end mutual funds.
- Closed-end mutual funds.
A is correct. Exchange traded funds do not have capital gain distributions. If an investor sells shares of an ETF (or open-end mutual fund or closed-end mutual fund), the investor may have a capital gain or loss on the shares sold; however, the gain (or loss) from the sale is not a distribution.
Can someone pls explain the answer to this question??
See exchange traded funds generally the manager invests in gold or other metals or securities which are held by the trustee of the exchange traded fund. At times if there is too much redemption of etf in that case the investor doesn’t get back cash rather they are given the securities in the etf so there is no capital gain distribution
This is actually answer for redemption in kind and therefore no capital gains distribution.
PM – An overview, last lecture (6th) first 5-10 mins sir very elaborately explained and dictated a Note stating reason behind Answer A.