ETF Education Report: First Trust-abrdn Emerging Opportunity Fund (FEO)

What this ETF is trying to do

The First Trust-abrdn Emerging Opportunity Fund (FEO) is an Exchange Traded Fund (ETF) traded on the NYSE. While the specific investment goal is not listed in the data, ETFs are tools used to invest in groups of different assets.

What the numbers show

It is important to understand the difference between "price return" and "total return." Price return only tracks how much the share price changes. Total return includes both the price change and any cash distributions paid out to investors.

According to the data:

• Year-to-Date (YTD): The price return is -27.31%, while the total return is -21.29%.

• One-Year: The price return is -31.72%, while the total return is -24.08%.

• Three-Year: The price return is -30.12%, while the total return is -3.89%.

To see how much the price has changed, we can look at an estimated price from roughly one year ago, which was approximately $14.03. The current price is $9.58.

If you had invested $10,000 into this ETF one year ago based on these price changes alone, your investment would have dropped to approximately $6,828 before accounting for any cash distributions.

Income and distribution explanation

This ETF has a distribution yield of approximately 11.48%. This means the fund pays out cash relative to its share price. The trailing distributions are $1.10, and the fund usually pays these out quarterly (four times a year).

It is important to remember that a high distribution yield does not mean you are earning that percentage as your total return. High yields can sometimes be misleading if the share price is falling at the same time.

NAV erosion explanation

This fund has a "severe erosion-risk flag." This means the data shows significant price deterioration. The erosion-risk score is 30, which is labeled as "significant price erosion."

"NAV erosion" refers to a decline in the value of the fund's underlying assets. While a falling market price is not the same thing as NAV erosion, this fund shows significant price deterioration. When a share price falls from a high point (like $14.03) to a much lower point (like $9.58), it can destroy the principal—the original amount of money you put in. Income investors often prefer funds where the price stays steady or goes up, because if the price collapses, the cash distributions may not be enough to make up for the lost value.

Pros

• The fund provides a high distribution yield of approximately 11.48%.

Cons

• The fund has experienced significant share-price declines over the last year and three years.

• There is a severe erosion-risk flag present.

Beginner takeaway

When looking at ETFs, always look at the "total return" rather than just the "distribution yield." A high cash payment might look good, but if the share price is dropping quickly, you could still lose money overall.