ETF Report: Vanguard Extended Duration Treasury Index Fund (EDV)

The Vanguard Extended Duration Treasury Index Fund (EDV) is an ETF designed to provide exposure to long-term U.S. Treasury bonds. It is characterized by a distribution yield of approximately 5.78% and has recently experienced a decline in share price.

What this ETF is trying to do

EDV focuses on "extended duration" Treasuries. In simple terms, this means it invests in government bonds that take a very long time to mature. These types of funds are often used by investors who want income from government bonds or who want to bet on how interest rates will change over many years.

What the numbers show

The share price of EDV is currently $55.25. Based on data from roughly one year ago, the estimated price was $67.84.

The performance numbers show a decline in value over several timeframes:

• Year-to-Date: The price return is -15.01%, while the total return is -11.63%.

• One Year: The price return is -18.56%, while the total return is -14.28%.

• Three Year: The price return is -17.68%, while the total return is -5.21%.

• Five Year: The total return is -49.00%.

Price return only measures the change in the share price. Total return is a broader measure that includes the distributions paid to investors.

Income and distribution explanation

EDV pays distributions usually every quarter. Over the last 12 months, it has made 4 payments totaling $3.19 per share. This results in a distribution yield of approximately 5.78%.

It is important for beginners to remember that a high distribution yield does not guarantee a profit. In this case, the total returns are negative, meaning the cash payments from distributions were not enough to offset the drop in the share price.

Price and NAV erosion explanation

The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

Regarding price-based evidence, EDV has an erosion score of 55, which is labeled as "Moderate price erosion." This means the share price has shown a steady downward trend. However, the "severe erosion-risk flag" is false, meaning it has not hit the most extreme risk levels defined by the screening rules.

Pros

• Government Backing: It invests in U.S. Treasuries.

• Regular Income: It provides quarterly cash distributions.

Cons

• Price Decline: The fund has seen significant share-price declines over the short and long term.

• Negative Total Returns: Even with distributions, the overall return over the last five years has been deeply negative.

Beginner takeaway

EDV provides a way to own long-term government bonds and receive regular income. However, the data shows that the share price has fallen significantly. This serves as a reminder that you can receive a high distribution yield while still losing money on your overall investment if the share price drops faster than the distributions pay out.