I was interested in adding an index ETF’(s) into my portfolio. I viewed the five(5) ETF’s that the Fool has listed in “Our top investments to hold for 5 years” page which lists the timely stocks, foundational stocks and ETF’s. I currently hold an S&P 500 index mutual fund so I would like to add an ETF that doesn’t overlap. (Example-I read that a total market index ETF may overlap the S&P 500). I noticed when researching Vanguard ETF’s (I’m interested in these) there seems to be several ETF’s for large, medium, and small cap that tracks different indexes. For example, the VB small cap index tracks the CRSP US Small Cap Index but the Vanguard VTWO Russell 2000 tracks the Russell 2000. Why is the Fool recommending the VB? Does this ETF hold all the small cap companies? Is there a way to buy an ETF that holds all these small caps to make it easier? It’s a little confusing.
Secondly, my understanding is ETF’s don’t have many capital gains taxes, but may have dividends. And if held in an IRA one doesn’t need to worry about paying these taxes until making distributions during retirement. On the other hand, if an ETF is held in a taxable account the taxes are paid on the dividends that year but the capital gains taxes are paid when you sell shares. Is this correct?
Lastly, If I did buy an index ETF in a taxable account which market cap or sector(large,medium,small/growth,value/technology,) would be best in this type of account to reduce dividend taxes and/or capital gains taxes?
Basically, I felt it necessary to add an ETF’(s) into my portfolio and I knew where to come with my questions knowing this community has very knowledgeable people.
Thank you Fools.