ETF Education Report: AMERICAN CENTURY CALIFORNIA MUNICIPAL BOND ETF (CATF)

What this ETF is trying to do

The CATF ETF is an exchange-traded fund that focuses on California municipal bonds. Municipal bonds are loans made to local government entities. This ETF is designed to provide investors with access to these types of bonds through a single fund.

What the numbers show

When looking at how an ETF performs, it is important to look at two different types of returns: price return and total return.

• Price Return: This measures only the change in the share price. For CATF, the year-to-date (YTD) price return is approximately -4.94%. The one-year price return is approximately -4.35%.

• Total Return: This includes the share price change plus any cash distributions paid out to investors. The YTD total return is approximately -2.63%, and the one-year total return is approximately -1.16%.

Because the total return numbers are higher than the price return numbers, it shows that the cash distributions helped offset some of the share-price decline.

To visualize this, if you had invested in the shares one year ago, the estimated price from roughly one year ago was $49.70. The current price is $47.54.

Income and distribution explanation

This ETF provides cash to investors through distributions. The distribution yield is approximately 3.45%. This number describes the cash paid out relative to the current ETF price. These payments usually happen monthly, with 11 distributions recorded over the last 12 months.

It is important to remember that a distribution yield is not the same as total return. While distributions provide cash income, they do not guarantee that your original investment 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 over time. StockValueFinder uses an erosion-risk score to measure this risk.

CATF 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 present. This suggests that the fund's value has not shown signs of significant structural decay based on these measurements.

Pros

• The fund provides regular cash distributions (usually monthly).

• The erosion-risk score suggests the fund is currently stable or moving sideways rather than experiencing rapid value loss.

Cons

• The ETF has experienced a share-price decline over the last year.

• Both the YTD and one-year total returns have been negative.

Beginner takeaway

When looking at an ETF like CATF, remember that share prices can go down even if the fund is paying out cash. Always look at both the price return (the change in share cost) and the total return (which includes the cash you received) to get a full picture of how the investment has performed.