What this ETF is trying to do

The First Trust Senior Floating Rate Income Fund II (FCT) is an ETF focused on providing income through senior floating rate assets. An ETF is like a basket that holds different investments, and this specific basket aims to pay out regular cash to its investors.

What the numbers show

It is important to understand that there are two ways to look at how an ETF performs: price return and total return.

• Price return only looks at whether the share price went up or down.

• Total return includes both the change in share price AND any cash distributions (payments) you received.

For FCT, the share price has been dropping. The one-year price return was approximately -3.59%. If you had invested $10,000 exactly one year ago based on the estimated starting price of $10.03 per share, your investment would have dropped to about $9,641.00 due to this share-price decline.

However, when you look at the one-year total return, the number is actually positive at 7.32%. This is because the cash payments received helped make up for the falling share price. Over three years, the total return was much higher at approximately 35.51%, even though the three-year price return was -3.20%.

Income and distribution explanation

This ETF is known for its distribution yield, which is approximately 10.87%. This number describes the cash payments relative to the current share price. Over the last year, the fund paid out about $1.05 per share. These payments usually happen monthly, with 11 payouts recorded in the last 12 months.

While a high distribution yield can provide regular cash, it does not guarantee that your original investment will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the actual value of the assets inside the fund goes down. If an ETF's price falls significantly, it can sometimes be a sign of this.

For FCT, the StockValueFinder erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is described as "good," and there is no severe erosion-risk flag. This suggests that while the share price has moved down, the risk of the fund's underlying value collapsing is not currently flagged as severe.

Pros

• High Total Returns: Over a three-year period, the total return was 35.51%.

• Regular Income: The fund provides a high distribution yield and pays out frequently (usually monthly).

• Stable Risk Score: The erosion-risk score suggests the fund is currently stable or moving sideways.

Cons

• Falling Share Price: The price return has been negative for the year-to-date period (-3.97%) and the one-year period (-3.59%).

• No Holding Data: No specific top holdings were provided in the current data.

Beginner takeaway

When looking at ETFs like FCT, don't just look at the share price or just the yield. A fund can have a falling share price but still provide a positive total return if the cash payments are large enough. Always check both the price return and the total return to see the full picture of how the investment performed.