Understanding the iShares Fallen Angels USD Bond ETF (FALN)

What this ETF is trying to do

The iShares Fallen Angels USD Bond ETF (FALN) is an exchange-traded fund that focuses on bonds. While the specific holdings are not listed in this report, this type of ETF generally tracks "fallen angel" bonds, which are bonds that were once considered high quality but have since been downgraded.

What the numbers show

When looking at an ETF, it is important to understand the difference between price return and 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 cash distributions (dividends) paid out to investors.

For FALN, the numbers show a difference between these two:

• Year-to-Date (YTD): The price return is approximately -3.99%, but the total return is +0.25%.

• One Year: The price return was approximately -5.14%, while the total return was +1.19%.

• Three Year: The price return was approximately 5.05%, while the total return was much higher at 26.83%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was $27.63. The current price is $26.21. This shows that the share price has declined over the last year, even though the total return remained positive due to distributions.

Income and distribution explanation

This ETF provides regular cash payments, known as distributions. The distribution yield is approximately 6.71%. This means the amount of cash paid out is quite high relative to the ETF's price. These distributions usually happen monthly, with 12 payments recorded over the last year.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. StockValueFinder uses an erosion-risk score to measure this risk. FALN has an erosion score of 75, which is labeled as "mild price erosion." This indicates a mild risk level regarding price deterioration. It is important to remember that a falling share price does not always mean the fund's Net Asset Value (NAV) has collapsed, but it is a measurement of price movement trends.

Pros

• The ETF has a high distribution yield of approximately 6.71%.

• The total return figures (which include dividends) have been positive over the one-year and three-year periods.

• It has an income rating grade of "A."

Cons

• The share price has experienced declines (negative price returns) over the year-to-date and one-year periods.

• There is a "mild" erosion-risk score of 75.

Beginner takeaway

For new investors, the most important lesson here is that a high distribution yield does not tell the whole story. While FALN pays out significant cash, the share price itself has gone down recently. Always look at the total return to see how much you actually earned after both price changes and cash payments are combined.