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Subject:  Re: Rydex equal weight S&P ETF Date:  5/17/2004  2:54 PM
Author:  rkmacdonald Number:  41032 of 100110

ETFs have extremely low taxable distributions because they exploit a tax loophole for "in kind" trades. Rebalancing within an ETF is almost always not a taxable event. Is there some reason why this ETF does not or can not do this?

I don't know whether rebalancing within an ETF causes a taxable event to the shareholder or not, but, since this is not a cap weighted index, rebalancing will have to take place continually (quarterly), while in a cap weighted index, it stays nearly balanced automatically, and the only significant rebalancing required is when companies leave or are added to the index. The continual rebalancing need for this new ETF is probably what has caused it's high expense ratio of 0.4%.

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