Understanding the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB)

What this ETF is trying to do

The EMB is an Exchange Traded Fund (ETF) that focuses on bonds from emerging markets. Bonds are essentially loans made to governments or companies in developing nations. This ETF allows investors to gain exposure to these different debt instruments through a single fund.

What the numbers show

When looking at an ETF, it is important to separate "price return" from "total return."

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

• Total Return: This includes both the change in share price and the money paid out through distributions (dividends).

For EMB, the numbers show different results depending on how you look at them:

• Year-to-Date (YTD): The price return is approximately -5.31%, while the total return is -1.48%.

• One Year: The price return was approximately -4.08%, but the total return was a positive 1.02%.

• Three Years: The price return was approximately 12.36%, and the total return was much higher at approximately 31.55%.

To visualize the price change, the estimated price from roughly one year ago was $95.05. The current price is $91.17.

Income and distribution explanation

This ETF provides regular cash payments to investors. The distribution yield is approximately 5.41%. These distributions usually happen monthly, with the most common payout day being Monday.

It is important to remember that a high distribution yield does not mean the investor earned that same percentage as their total return. Total return is the most accurate way to see how much value was actually created or lost over time.

NAV erosion explanation

"NAV erosion" refers to a situation where the value of the underlying assets in the fund decreases over time. StockValueFinder uses an "erosion-risk score" to measure this risk.

For EMB, the erosion score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag. This suggests that the fund's structure is currently showing signs of stability regarding its value.

Pros

• The fund has a history of positive total returns over the last one, three, and five years.

• It provides regular monthly income.

• The erosion-risk measurements suggest a stable profile.

Cons

• The share price has seen declines in both the year-to-date and one-year periods.

• The price return is often lower than the total return because the share price itself has dropped.

Beginner takeaway

When looking at EMB, notice the difference between the falling share price and the positive total return. While the price of a single share has gone down recently, the cash distributions help boost the overall total return. Always look at both price and total returns to get the full picture.