ETF Education Report: BlackRock Investment Quality Municipal Trust (BKN)

What this ETF is trying to do

BlackRock Investment Quality Municipal Trust (BKN) is an Exchange Traded Fund (ETF). While the specific investment goals are not listed in the data, the name suggests it focuses on municipal investments.

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 any cash distributions paid out to investors.

Here is what the data shows for BKN:

• Year-to-Date (YTD): The price return is approximately 3.04%. However, the YTD total return is higher at approximately 4.07%.

• One-Year: The one-year price return was a decline of approximately -1.11%. Even with that share-price decline, the one-year total return was approximately 5.16%.

• Three-Year: The three-year price return was a decline of approximately -6.79%, but the three-year total return was approximately 9.84%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was approximately $11.67. The current price is $11.54.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 5.93%. This number describes the cash paid out relative to the current ETF price. These distributions usually happen monthly, with 12 payments made over the last year.

It is important to remember that a high distribution yield is not the same as total return. While distributions provide cash income, they do not guarantee that your original investment (your principal) will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. In this report, we use an "erosion-risk score" to measure the risk of price deterioration.

BKN has an erosion-risk score of 75, which is labeled as "mild price erosion." This is a measurement of risk and not proof that the NAV has definitely declined. There is no "severe erosion-risk flag" for this ETF.

Pros

• The total return figures (which include distributions) have been positive over the last year and the last three years.

• The ETF provides regular monthly cash distributions.

Cons

• There has been a share-price decline over the one-year and three-year periods.

• The erosion-risk score indicates a "mild" level of price erosion risk.

Beginner takeaway

When looking at ETFs like BKN, always look at the total return rather than just the price return. Because this ETF pays out cash, the share price might go down even if the total return is positive. High yields can be helpful for income, but investors should always monitor erosion-risk scores to understand how the share price is behaving over time.