ETF Education Report: BWZ

What this ETF is trying to do

The SPDR(R) Bloomberg Short Term International Treasury Bond ETF (ticker: BWZ) is an exchange-traded fund. Based on its name, it focuses on short-term international treasury bonds.

What the numbers show

When looking at an ETF, it is important to know 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 payments (distributions) made to investors.

Here is what the data shows for BWZ:

• Year-to-Date (YTD): The price return is approximately -2.63%. However, the total return is approximately -1.07%.

• One Year: The price return is approximately -3.23%, while the total return is approximately -1.18%.

• Three Years: The price return is approximately 3.57%, and the total return is approximately 10.60%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was $27.58, and the current price is $26.69.

Income and distribution explanation

Some investors look for ETFs that pay out cash, known as distributions. BWZ has a distribution yield of approximately 2.13%. This means the cash payments represent about 2.13% of the ETF's price. These distributions usually happen monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not mean you are making that much money in total. You must always look at the total return to see how the investment performed overall.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price can look like erosion, they are not always the same thing.

StockValueFinder uses an "erosion-risk score" to measure this risk. BWZ has an erosion score of 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag for this ETF.

Pros

• The three-year total return is positive at approximately 10.60%.

• The fund has a "good" erosion severity rating.

• It provides regular monthly distributions.

Cons

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

• The share price has declined compared to the estimated price from one year ago.

Beginner takeaway

When studying BWZ, notice that the total return is different from the price return. For example, over the last year, the price dropped by 3.23%, but because of the cash distributions, the total return was a smaller loss of 1.18%. Always check both numbers to get the full picture.