You've probably heard the old saw that it’s not what you make, it’s what you keep. But honestly, most investors are terrible at the "keep" part. They chase returns, brag about a 20% gain in some tech stock, and then act surprised when the IRS shows up to claim a massive chunk of that win.
Tax drag is real. It’s quiet, it’s persistent, and it eats your compounding for breakfast.
The Cambria Tax Aware ETF (ticker: TAX) was built because Meb Faber and the team at Cambria got tired of watching people pay "voluntary" taxes. Launched in late 2024, this fund isn't just another flavor of the month; it’s a specific tool for people who are sick of high-dividend tax bills and the capital gains hit that usually comes with rebalancing.
The Core Philosophy: Why Dividends Can Be a Trap
Most investors love dividends. There is something deeply satisfying about seeing cash hit your brokerage account every quarter. But if you’re in a high tax bracket and holding those stocks in a taxable account, that "income" is often taxed as ordinary income or at best, qualified dividend rates.
You’re essentially forced to realize a gain and pay the government, whether you need the cash or not.
The Cambria Tax Aware ETF flips the script. Instead of looking for yield, it looks for value and quality in companies that don't pay high dividends. By targeting stocks with low or no dividend yields, the fund seeks to keep the growth "inside" the share price. You only pay taxes when you decide to sell your shares of the ETF, not when a corporate board decides to send you a check.
It’s a subtle shift that makes a massive difference over twenty years.
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How the Strategy Actually Works
The fund is actively managed. This isn't a "set it and forget it" index. The quant model used by Cambria starts with a universe of about 1,000 of the largest U.S. stocks.
They then apply a series of filters:
- The Dividend Screen: They boot out the high-yielders. If a company is spitting out too much cash, it's gone.
- The Value Composite: They look at metrics like Price-to-Sales, Price-to-Earnings, and Enterprise Value to EBITDA. They want cheap stocks, not just any stocks.
- The Equal Weight Twist: Unlike the S&P 500, where a few tech giants run the show, this ETF holds its positions—typically between 50 and 500 stocks—on an equal-weighted basis.
As of early 2026, the portfolio is leaning heavily into sectors like industrials and information technology. You'll find names like Advanced Micro Devices (AMD), Comfort Systems USA (FIX), and Alphabet (GOOGL). These are companies that often reinvest in themselves rather than paying out fat dividends, which fits the "tax-aware" mandate perfectly.
The Secret Weapon: The 351 Exchange
This is the part most people miss. The Cambria Tax Aware ETF isn't just for people buying shares with cash.
It was actually designed to solve a specific problem for wealthy investors and RIAs: the "locked-in" gain. Imagine you’ve owned $5 million worth of Tesla or Apple for a decade. Your cost basis is basically zero. If you sell to diversify, you owe the IRS a small fortune.
Cambria uses something called a Section 351 Exchange.
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Basically, it allows investors to contribute their highly appreciated individual stocks directly into the ETF in exchange for shares of the fund. Because it’s structured as a "contribution to a corporation," it’s generally a non-recognition event for tax purposes. You move from a concentrated, risky position into a diversified portfolio without triggering a massive tax bill on day one.
It’s one of the few legal "cheat codes" left in the tax code for diversifying a portfolio.
What Are the Risks?
Let's be real—nothing is free.
First, there is the Value Risk. If growth stocks are screaming higher and value is in the gutter, this ETF might lag. It’s a multi-factor value strategy at its heart. If you can't handle underperforming the S&P 500 for a few years while waiting for value to come back into favor, this isn't for you.
Second, the Expense Ratio. At 0.49%, it's more expensive than a dirt-cheap Vanguard index fund. You’re paying for the active management and the tax-shielding strategy. For many, the tax savings far outweigh the 49 basis points, but you have to do the math for your own situation.
Finally, the Tax-Aware nature means it won't be perfect. The fund still has turnover—roughly 66% according to recent filings. While the ETF structure helps "wash away" many capital gains through the creation/redemption process, an active strategy can still occasionally distribute gains if the manager has to sell positions that haven't been offset.
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Is It Right For You?
If you are investing in a 401(k) or an IRA, the Cambria Tax Aware ETF is probably unnecessary. In those accounts, you don't care about dividends or capital gains because the account itself is tax-sheltered. You might be better off with a standard value fund or a low-cost index.
However, if you have a taxable brokerage account and you're tired of the annual tax drag, this is a serious contender.
It’s particularly powerful for:
- High-earners in the top tax brackets who see dividends as a nuisance.
- Investors with concentrated positions who want to use the 351 exchange window to diversify.
- Quantitative-minded investors who believe in the long-term power of value and quality factors.
Actionable Next Steps
To decide if this fits your portfolio, you shouldn't just look at the ticker. Start by reviewing your last 1099-DIV. Look at how much you paid in taxes on dividends you didn't even want.
If that number made you wince, check the current holdings of TAX on the Cambria website to see if you're comfortable with the specific value names they are betting on. If you're an advisor or an investor with a massive unrealized gain in a few stocks, reach out to Cambria about their next "351 window." They don't do these exchanges every day, so timing matters.
Don't let the tax man be your most significant investment partner. Evaluate your "after-tax" returns, not just the "pre-tax" headlines, and you'll likely find that a tax-aware approach is the only way to play the long game.