What this ETF is trying to do

The FRANKLIN FTSE MEXICO ETF (ticker: FLMX) is an exchange-traded fund that focuses on companies in Mexico. It provides investors with a way to own a piece of many different Mexican businesses through a single investment.

Based on the Top Holdings provided, this fund includes companies like Grupo Mexico SAB de CV Class B and Grupo Financiero Banorte SAB de CV Class O. Because the holdings list is partial, these are just some of the companies in the fund, not all of them. Please remember that what a fund owns can change over time.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This measures only how much the share price has moved up or down.

• Total Return: This measures the overall gain, including both the share price changes and any cash distributions (dividends) paid out.

For FLMX, the numbers show growth in both areas:

• Year-to-Date (YTD): The price return is approximately 2.92%, while the total return is approximately 4.94%.

• One Year: The price return was approximately 9.05%, while the total return was approximately 13.50%.

• Three Years: The price return was approximately 29.92%, while the total return was approximately 45.56%.

To visualize the price change, you can look at the estimated price from roughly one year ago, which was $31.95. The current price is $34.84.

Income and distribution explanation

Some investors look for ETFs that pay out cash, known as distributions. FLMX has a distribution yield of approximately 4.08%. This means the amount of cash paid out is about 4.08% relative to the ETF's price.

The fund has made three distributions over the last 12 months, and the frequency is described as irregular or less frequent. It is important to remember that a high distribution yield does not guarantee that an investor will earn that same percentage as a total return.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases significantly. Some investors worry that high payouts might cause this.

However, for FLMX, the erosion-risk score is 100, which is labeled as "No price erosion detected." The erosion severity is listed as "good," and there is no severe erosion-risk flag present.

Pros

• Positive Returns: The fund has shown positive price returns and total returns over the one-year and three-year periods.

• Income Potential: The fund provides a distribution yield of approximately 4.08%.

Cons

• Irregular Payouts: The distributions do not happen on a regular, predictable schedule.

• Market Concentration: The fund is focused on a specific geographic area (Mexico).

Beginner takeaway

When studying FLMX, notice the difference between the share price movement and the total return. The total return is higher because it includes the cash distributions paid to investors. While the fund provides income, always remember that price changes and distributions are two different parts of an investment's performance.