Understanding the Vanguard Total Bond Market Index Fund ETF (BND)

What this ETF is trying to do

The Vanguard Total Bond Market Index Fund ETF (BND) is an exchange-traded fund (ETF). While the specific holdings are not listed in this report, this type of fund generally aims to track a broad index of the bond market.

What the numbers show

When looking at an ETF, it is important to know the difference between "price return" and "total return."

• Price Return: This only measures how much the share price itself has changed.

• Total Return: This includes both the change in share price and any cash distributions (dividends) paid out to investors.

For BND, the numbers show different trends depending on the time frame:

• Year-to-Date (YTD): The price return is approximately -5.66%, while the total return is approximately -2.75%.

• One Year: The price return is approximately -5.96%, while the total return is approximately -2.11%.

• Three Years: The price return is approximately 1.20%, while the total return is much higher at approximately 13.42%.

To give you an idea of the price movement, the current price is $69.88. The estimated price from roughly one year ago was approximately $74.31.

Income and distribution explanation

Some investors look at ETFs for regular cash payments, known as distributions. BND has a distribution yield of approximately 4.21%. This means the cash distributed is about 4.21% of the ETF's price. These distributions usually happen monthly, and over the last 12 months, there were 12 payouts.

It is important to remember that a high distribution yield is not the same thing as total return. A fund can pay out cash even if the share price is going down.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. StockValueFinder uses an "erosion-risk score" to measure this risk. BND has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not mean the fund's value has definitely collapsed. There is no severe erosion-risk flag for this ETF.

Pros

• The fund provides regular monthly distributions.

• The three-year total return has been positive at approximately 13.42%.

Cons

• The one-year and year-to-date price returns have been negative.

• There is a measurement of "mild" price erosion.

Beginner takeaway

When studying BND, notice that the total return is usually higher than the price return. This happens because the total return includes the cash distributions you receive. However, even with these payments, the share price has seen some declines recently. Always look at both the price change and the total return to get the full picture.