ETF Education Report: Morgan Stanley Emerging Markets Domestic Debt Fund Inc (EDD)

What this ETF is trying to do

This ETF, known by its ticker symbol EDD, is an investment fund that focuses on emerging markets domestic debt. This means it generally invests in bonds or debt from countries that are still developing their economies.

What the numbers show

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

• Price Return: This measures only 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 EDD, the numbers show a difference between these two:

• Year-to-Date (YTD): The price return is approximately 4.05%, while the total return is higher at approximately 11.29%.

• One Year: The price return is approximately 0.53%, while the total return is approximately 12.53%.

• Three Years: The price return is approximately 24.72%, while the total return is approximately 71.43%.

To give you an idea of price movement, the estimated price from roughly one year ago was $5.62. The current price is $5.65.

Income and distribution explanation

Some investors look for ETFs that pay out regular cash. This is called the distribution yield. EDD has a distribution yield of approximately 11.15%. This means the fund has paid out $0.63 in trailing distributions. These payments usually happen quarterly, and most recently, they have been paid on Tuesdays.

It is important to remember that a high distribution yield does not mean the investor earned that exact percentage as their total return. You must look at the "total return" figure to see how the investment performed overall including those payments.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases over time. Investors often care about this because they want to make sure their original investment stays stable while they collect income.

For EDD, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• The fund shows a significant difference between price return and total return, suggesting that distributions contribute heavily to the overall performance.

• The erosion-risk measurements suggest a stable price trend.

Cons

• The one-year price return (0.53%) is much lower than the one-year total return (12.53%), meaning most of the gains came from distributions rather than the share price increasing.

Beginner takeaway

When you see an ETF with a high distribution yield, always check the total return. The price of the share might not move much (price return), but the total return tells you how much you actually gained when you include the cash payments.

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*Disclaimer: This report is for educational purposes only. It does not provide financial advice. I am not recommending whether you should buy, sell, or hold this ETF.*