If you hold your ETF investments outside registered accounts, taxes can take a big bite out of your returns. Unfortunately, comparing the tax-efficiency of similar ETFs is difficult, because there is no standard method for estimating after-tax returns. In Canada, fund returns are reported on a pre-tax basis, but this can be misleading.

As we will see, two funds with similar pre-tax returns can perform very differently when you account for the tax investors would pay on the distributions. The goal of this paper is to emphasize the need for reliable after-tax return data so investors can make better decisions when selecting ETFs for their portfolios.

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