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How do index ETFs handle dividends?

April 26, 2017dividends ETFs index

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How do index ETFs handle dividends?

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Index ETFs handle dividends in different ways. iShares reinvest dividends in the fund when they are paid. Most funds, such as SPY and QQQ, hold dividends in cash-equivalent instruments until a pre-determined distribution, typically at the end of each month or quarter. HOLDRs distribute cash dividends immediately. In any case, whether the fund distributes or reinvests the dividends, this is still a taxable event for the shareholder.