ETF Education Report: abrdn National Municipal Income Fund (VFL)

What this ETF is trying to do

The VFL ETF is an investment fund that focuses on municipal income. While the specific holdings are not listed in the provided data, funds of this type generally aim to provide regular income to investors through municipal bonds.

What the numbers show

It is important to understand the difference between price return and total return. Price return only tracks how much the share price changes. Total return includes both the price change and the distributions (cash payments) received.

• Year-to-Date (YTD): The YTD price return is approximately 0.39%. However, the YTD total return is higher at approximately 3.63%.

• One Year: The one-year price return was approximately 5.96%. The one-year total return was approximately 12.72%.

• Three Years: The three-year price return was approximately 3.93%, while the three-year total return was approximately 22.48%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was approximately $9.73. If you had invested $10,000 into this ETF one year ago, your investment's share value would have grown to approximately $10,596 based on the price return alone, before adding any cash distributions.

Income and distribution explanation

This ETF provides regular cash payments. The distribution yield is approximately 6.05%. This number describes the cash distributions relative to the current share price of $10.31. Over the last 12 months, there were 13 distributions, which usually happen on a monthly basis. Most of these payments occurred on Fridays.

NAV erosion explanation

"NAV" stands for Net Asset Value, which is the actual value of the assets held by the fund. "NAV erosion" happens when the value of those underlying assets drops significantly over time.

For this ETF, the erosion-risk score is 94, and the label is "Stable / sideways." The erosion severity is described as "good," and there is no severe erosion-risk flag present. This suggests that the fund's price movements have not shown signs of the substantial deterioration often seen in high-risk funds.

Pros

• The total return figures are higher than the price return figures, showing that distributions add value to the overall return.

• The erosion-risk measurements suggest a stable price pattern rather than a collapsing one.

Cons

• Total return and distribution yield are not the same thing; a high yield does not guarantee that the share price will stay stable.

• As with all investments, past performance does not predict future results.

Beginner takeaway

When looking at income-focused ETFs, it is helpful to look at both the price return and the total return. A high distribution yield can be misleading if the share price is falling quickly. Income investors often prefer funds that stay stable or grow slightly in price, because a collapsing share price can destroy the original money invested (the principal), even if the fund pays out cash.