3 Reasons to Add Tax-Efficient ETFs Exposure Now

Group 1 - The end of the year and tax year is approaching, creating complexities for investors in the stock market, with tax-efficient ETFs being a potential solution for tax relief and income generation [1][2] - Tax-efficient ETFs not only help with tax implications but also provide current income, which is significant in the uncertain market environment of late 2025, influenced by tariff issues, geopolitical risks, and potential inflation [2] - Active management in bond ETFs can offer advantages over passive strategies, particularly in assessing issuer quality and maintaining allocations amidst bond defaults or early calls [3][4] Group 2 - Rate cuts could create turbulence in fixed income markets, affecting tax-efficient ETFs that rely on municipal bonds, yet these bonds may still stand out due to their tax benefits [5] - The American Century Diversified Municipal Bond ETF (TAXF) charges a fee of 27 basis points and actively invests in both investment-grade and high-yield municipal bonds, providing income while lowering tax exposure [6] - TAXF has returned 1.5% over the last three months, outperforming its category averages, indicating that tax-efficient ETFs could be a strategic investment choice moving forward [6]