ETF Report: abrdn Life Sciences Investors (HQL)

What this ETF is trying to do

The HQL ETF, known as the abrdn Life Sciences Investors, is an exchange-traded fund listed on the NYSE. While the specific companies it owns are not listed here, the name suggests it focuses on the life sciences sector. An ETF is like a basket of different stocks that investors can buy all at once.

What the numbers show

The current price for one share of HQL is $19.73. Looking at how this fund has performed, the numbers show significant growth over the last year. The price alone went up by 51.18% over the past twelve months. When you include the money paid out to investors, the "total return" for the year was 71.16%.

Year-to-date (from the start of the year until now), the price has grown by 17.58%, and the total return is 25.45%. Over a three-year period, the total return reached 113.37%.

Income and distribution explanation

Some investors look for ETFs that pay them regular cash, which is called a "distribution." HQL has a distribution yield of 10.33%. This means the amount paid out relative to the price is quite high. Over the last 12 months, there were 4 payouts. These usually happen on a quarterly basis, meaning four times a year. Most of these payments (three out of four) have happened on a Friday.

It is important to remember that a high yield alone can be misleading. A high percentage might look attractive, but it does not tell the whole story about how much the actual value of the fund is changing.

NAV erosion explanation

"NAV erosion" happens when an ETF's share price keeps falling over time because it is paying out more money than it is actually earning. If a fund's price drops from a high number to a much lower number, it can destroy your "principal." Principal is the original amount of money you put in. If you invest $100 and the price drops to $50, you have lost half your money, even if they sent you some cash along the way.

However, for HQL, no price erosion was detected. The erosion score is listed as "good," meaning the price has been growing rather than shrinking.

Pros

• The fund has shown very high total returns over the last one, two, and three years.

• It provides a high distribution yield for those seeking regular cash payments.

• The data shows no signs of price erosion.

Cons

• High-yield investments can sometimes be more volatile (change in price quickly).

• Investors must always watch if the share price is falling while they collect income.

Beginner takeaway

Income investors usually prefer ETFs that go sideways (stay at the same price) or move slightly up. This is because they want to collect their cash payments without losing the original money they invested. If an ETF's price collapses, the "income" might not be enough to make up for the lost value of the shares. In the case of HQL, the data shows the price has been rising significantly alongside its distributions.