When investors want to sell their ETF holdings, they can do so by one of two methods. The first is to sell the shares on the open market. This is generally the option chosen by most individual investors. The second option is to gather enough shares of the ETF to form a creation unit, and then exchange the creation unit for the underlying securities. This option is generally only available to institutional investors due to the large number of shares required to form a creation unit. When these investors redeem their shares, the creation unit is destroyed and the securities are turned over to the redeemer. The beauty of this option is in its tax implications for the portfolio.
We can see these tax implications best by comparing the ETF redemption to that of a mutual fund redemption. When mutual fund investors redeem shares from a fund, all shareholders in the fund are affected by the tax burden. This is because to redeem the shares, the mutual fund may have to sell the securities it holds, realizing the capital gain, which is subject to tax. Also, all mutual funds are required to pay out all dividends and capital gains on a yearly basis. Therefore, even if the portfolio has lost value that is unrealized, there is still a tax liability on the capital gains that had to be realized because of the requirement to pay out dividends and capital gains.
ETFs minimize this scenario by paying large redemptions with stock shares. When such redemptions are made, the shares with the lowest cost basis in the trust are given to the redeemer. This increases the cost basis of the ETF's overall holdings, minimizing its capital gains. It doesn't matter to the redeemer that the shares it receives have the lowest cost basis, because the redeemer's tax liability is based on the purchase price it paid for the ETF shares, not the fund's cost basis. When the redeemer sells the stock shares on the open market, any gain or loss incurred has no impact on the ETF. In this manner, investors with smaller portfolios are protected from the tax implications of trades made by investors with large portfolios.
An ETF has many advantages over a mutual fund including costs and taxes. The creation and redemption process for ETF shares is almost the exact opposite of that for mutual fund shares. When investing in mutual funds, investors send cash to the fund company, which then uses that cash to purchase securities and in turn issues additional shares of the fund. When investors wish to redeem their mutual fund shares, they are returned to the mutual fund company in exchange for cash. Creating an ETF, however, does not involve cash.
The process begins when a prospective ETF manager (known as a sponsor) files a plan with the U.S. Securities and Exchange Commission to create an ETF. Once the plan is approved, the sponsor forms an agreement with an authorized participant, generally a market maker, specialist or large institutional investor, who is empowered to create or redeem ETF shares. (In some cases, the authorized participant and the sponsor are the same.)
The authorized participant borrows stock shares, often from a pension fund, places those shares in a trust and uses them to form ETF creation units. These are bundles of stock varying from 10,000 to 600,000 shares, but 50,000 shares is what's commonly designated as one creation unit of a given ETF. Then, the trust provides shares of the ETF, which are legal claims on the shares held in the trust (the ETFs represent tiny slivers of the creation units), to the authorized participant. Because this transaction is an in-kind trade — that is, securities are traded for securities—there are no tax implications. Once the authorized participant receives the ETF shares, they are sold to the public on the open market just like stock shares.
When ETF shares are bought and sold on the open market, the underlying securities that were borrowed to form the creation units remain in the trust account. The trust generally has little activity beyond paying dividends from the stock, held in the trust, to the ETF owners, and providing administrative oversight. This is because the creation units are not impacted by the transactions that take place on the market when ETF shares are bought and sold.
You have real talent there! Your comment:
" LOL 😎 😎 😎
You couldn't be further from the truth, pun intended.
IF you're offended, I apologize. but note:
I made no definitive statement(s). "
.... may be grammatically technically true but it projects your OPINION that you have already judged Eoin to be an apostate, which is why you were issuing the warning, albeit the warning having NO BASIS IN ACTUAL FACT.
Such things are how witch-hunts begin ... casting suspicions without a CLEAR AND PRESENT DANGER.
.... and then trying to weasel-word out of your self made trap .... sigh......
"Melinda has her letters that she doesn't send. I have my books. We're all encouraged to have our say in our heart to Jehovah and leave it at that, wherever possible. Reveal stuff in the context of where it may help, and there are such times, but don't put it on the clothesline in the front yard where the whole world sees......" ---TrueTom
Never wrote any letters; never sent any.
Think Anna said she did that as a coping mechanism. Read again.
Αποφοίτηση της 141ης Τάξης της Γαλαάδ: Μέρος 1—Εισαγωγή και Ομιλίες https://tv.jw.org/#el/video/VODProgramsEvents/pub-jwbgg_201609_1_VIDEO
Although, of course, reality is a bit of a subjective term. I suppose we could ask who's reality?
Anyway, I suspect you (and @JWInsider) mean that "the real world" that "some prominent brothers" are divorced from has reference to the set of circumstances experienced by non-SPOOFT Jehovah's Witnesses in their day to day interface with:
JWs, (congregational, social, and family life).
non-JWs (relatives, interested ones, neighbors, peers in education and the workplace, the non-JW community at large).
others (marked, inactive, disfellowshipped).
If that is the "reality" to which you are referring, then I would say that, in some cases, rather than a possibility, divorce from this "reality" is a certainty. And is likely a condition experienced by more than "some prominent brothers".
I would suggest that other such "la-la Land" inhabitants might include some brought up as Jehovah's Witnesses by Jehovah's Witnesses.