I'm retired & considering opening a brokerage account. I'm torn between an ETF & a mutual fund. Both have pros & cons. I read on the 'net that if a mutual fund client bails & closes his account, the remaining shareholders get stuck with paying his capital gains tax. He doesn't have to pay a penny. That's wrong & not fair to the remaining shareholders. I'm off my soapbox. I suppose that the capital gains tax is split equally among the remaining shareholders. So, it probably wouldn't amount to much. Are there any brokerages that don't require the remaining shareholders to pay the capital gains tax? Are there any brokerages that require the departing shareholder to pay his capital gains tax before the account is closed? If there are, what is it called? Is it federal law that the remaining shareholders must pay the capital gains tax? Or is it just a fact of life?
If a mutual fund only has two people in it, then yes, your concerns are valid. But consider that mutual funds have thousands and even tens of thousands of holders. One guy bailing is not going to have any noticeable effect on your position. Look into Vanguard funds, they have what you need. https://investor.vanguard.com/mutual-funds/
They say that ETFs are more tax-friendly than mutual funds. If I were to choose mutual funds over ETFs, I'd want a no-load, tax-friendly index mutual fund. I know that there are tax-managed mutual funds. Unfortunately, there are literally tens of thousands of mutual funds. I used the Morningstar mutual fund screener. There were over 100 funds displayed. I'm not interested in trading funds or options. I want to keep it simple. I read about roboadvisors. I'm intrigued about Betterment. So, I don't know which broker to choose.
If you are not trading and keeping it simple, just buy the SPY and a few ETF's which match your objectives and diversification goals. You don't need fancy broker, even Robinhood through your phone will be more than enough.
I've heard about Robinhood. Roboadvisors intrigue me. I understand the basics of tax-loss harvesting, portfolio rebalancing, options, etc., but I don't want to deal with the paperwork. I do want to have some control over my account. I'd rather pay H & R Block to do my taxes for me. I think that I'd rather have a roboadvisor account than say an account at TD Ameritrade.
