No. of Recommendations: 1
I remember a few years ago that we had a great oil-related Canadian ETF(?)that paid a good dividend.
Then one day the Canadian government said, "We decided that it is not that" and the stock cratered. Showing that it is not safe to invest in an ETF that is playing word games.
It's hard to say what might have happened there, without more details, but I think it's unlikely that a bond fund would collapse because of how the government thinks its income should be taxed. If there were to be a sell-off, one would expect a pretty quick recovery as investors swoop in to take advantage of very liquid 80c dollars.
The 'word games' in question involve the tax treatment of gains. If the increase in value is just undistributed interest piling up from the bond assets held, then it is conceivable that the government would want those gains taxed as income and not as capital gains. It wouldn't make a huge difference to me anyways, for what I expect to be a short hold. And as Jim pointed out, many bond funds like SGOV just distribute the interest as income and you don't have that opportunity of hoping the income will be taxed as a capital gain on the ETF. But its a feature of some bond funds that is worth considering.
