ETF Education Report: First Trust Specialty Finance & Financial Opportunities Fund (FGB)

What this ETF is trying to do

The First Trust Specialty Finance & Financial Opportunities Fund (FGB) is an Exchange Traded Fund (ETF) listed on the NYSE. While the specific investment strategy is not detailed in the provided data, ETFs like this generally aim to provide exposure to certain sectors of the financial market.

What the numbers show

It is important to understand that "price return" and "total return" are two different things. 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.

Here is what the data shows for FGB:

• Year-to-Date (YTD): The YTD price return is approximately -1.43%. However, the YTD total return is 3.30%. This shows that while the share price went down slightly this year, the total return was positive due to distributions.

• One-Year Performance: The one-year price return was approximately 7.51%. The one-year total return was much higher at approximately 18.38%.

• Three-Year Performance: The three-year price return was approximately 28.48%, while the three-year total return was approximately 72.46%.

The current price is $4.15. Based on the one-year price return, the estimated price from roughly one year ago was approximately $3.86.

Income and distribution explanation

This ETF has a distribution yield of approximately 9.64%. This number describes the cash distributions relative to the current ETF price. The fund usually pays distributions on a quarterly basis, with 4 payouts recorded over the last 12 months.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as their total return. Distributions provide cash income, but they do not guarantee that your original investment (your principal) will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in the fund decreases significantly. When an ETF's share price drops a lot, it can sometimes be a sign of erosion.

For FGB, the erosion-risk score is 100, which is labeled as "No price erosion detected." The erosion severity is rated as "good," and there is no severe erosion-risk flag present in the data.

Pros

• The fund has shown a significant difference between price return and total return, meaning distributions have added value to the overall performance.

• The three-year total return has been quite high at approximately 72.46%.

Cons

• The year-to-date price return is currently negative, meaning the share price has declined recently.

• There are no top holdings listed in the provided data to show exactly where the money is invested.

Beginner takeaway

When looking at ETFs, don't just look at the distribution yield. A high yield can sometimes be misleading if the share price is falling quickly. For many income investors, it is often preferred to find funds where the price stays steady or grows slightly, rather than funds that experience large price drops. Always look at the "total return" to see how both price changes and cash payments work together.