A Tax-Efficient Way to Access Moat Stocks

ETFs are structured to be some of the most tax-efficient investment vehicles available to investors. The underlying mechanics, including how ETF shares are created and redeemed, typically generate minimal taxable events. This can contribute to overall lower taxes for investors.

Accessing U.S. equities while avoiding capital gains tax may be difficult, especially when investing in individual stocks or mutual funds. VanEck’s Morningstar Wide Moat ETF (MOAT) could provide a solution: The Morningstar ® Wide Moat Focus Index SM (“Index”) places a focus on U.S. companies that Morningstar research recognizes to have sustainable competitive advantages, or “moats.” MOAT seeks to track the Index, which provides exposure to these moat companies trading at attractive prices compared to fair market value.

Morningstar’s forward-looking moat investing research process is supported by over 100 equity analysts, who cover over 1,500 stocks globally.

Historically, MOAT has never paid a capital gain.

Posting resilient returns this past quarter, the Index outperformed the S&P 500 Index, the Russell 1000 Growth Index, and the Russell 1000 Value Index YTD through September. The Index reposition in September 2021 resulted in value maintaining the largest exposure at 43%, relative to 32% core and 25% growth. After a record-breaking bull run for U.S. equities, the focus on valuation provides exposure to the areas of the market with the most opportunity.

This forward-looking moat strategy can serve as a core U.S. equity allocation not beholden to style box restraints, and can provide investors with tax-efficient exposure to U.S. equities.

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Originally published by VanEck on November 2, 2021.

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Important Disclosures

The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

This commentary is not intended as a recommendation to buy or to sell any of the sectors or securities mentioned herein. Holdings will vary for the MOAT ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: https://www.vaneck.com/us/en/investments/morningstar-wide-moat-etf-moat/holdings/ .

An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.

Fair value estimate: the Morningstar analyst’s estimate of what a stock is worth.

The Morningstar ® Wide Moat Focus Index SM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Morningstar Wide Moat ETF and bears no liability with respect to that ETF or any security. Morningstar ® is a registered trademark of Morningstar, Inc. Morningstar ® Wide Moat Focus Index SM is a service mark of Morningstar, Inc.

The Morningstar ® Wide Moat Focus Index SM consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.

The Russell 1000 Growth Index measures the performance of the large- cap growth segment of the US equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected and historical growth rates.

The S&P 500 ® Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an Index, it is unmanaged and is not a security in which investments can be made.Effective June 20, 2016, Morningstar implemented several changes to the Morningstar Wide Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 20 stocks to at least 40 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover and longer holding periods for index […]

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