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What does an in-kind redemption for ETF entail?


Ryan

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Hello Ryan,
As a new investor, you are always looking forward to making a good profit when you sell your securities. 
However, you do not consider the fact that the fund in which you are withdrawing cash, you are not depositing an equivalent amount of cash in it.
When your pool is undergoing a net outflow of funds, shares need to be sold to obtain money.
In-kind redemption in ETF is the basic procedure in which redemptions are produced.
 When an ETF investor wants to repossess their shares, the dealer will exchange the shares that they want to redeem for a number of securities that the investor has.
When ETF fund makes in-kind redemptions, it never sells its securities to get cash. Through this, ETF avoid having taxable gains for non-redeeming stakeholders.
ETF also use this mechanism to get rid of capital gains. They also allow non-redeeming partners to their taxable gains.

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