ETF Education Report: FIRST TRUST MANAGED MUNICIPAL ETF (FMB)

What this ETF is trying to do

The FIRST TRUST MANAGED MUNICIPAL ETF (ticker: FMB) is an exchange-traded fund. While the specific investment strategy is not detailed in the provided data, the name suggests it focuses on managed municipal investments.

What the numbers show

When looking at an ETF, 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 (dividends) paid out.

Based on the data provided:

• Year-to-Date (YTD): The price return is approximately -4.14%. However, the total return is -1.76%.

• One Year: The price return was approximately -3.71%, while the total return was approximately -0.19%.

• Three Years: The price return was approximately -1.98%, but the total return was 8.44%.

To visualize the price change, we can look at an estimated example. The price roughly one year ago was estimated to be $50.91. The current price is $49.02.

Income and distribution explanation

Some investors look for ETFs that pay out cash regularly. This is called the "distribution yield." For FMB, the distribution yield is approximately 3.74%. The data shows that these distributions usually happen monthly, with 12 payments made over the last year.

It is important to remember that a high distribution yield is not the same as total return. While distributions provide cash, they do not guarantee that your original investment will grow or stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in an ETF decreases over time. StockValueFinder uses an "erosion-risk score" to measure this risk.

FMB has an erosion score of 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present. This suggests the fund's price movement is not currently showing signs of significant structural decay according to these specific risk measurements.

Pros

• The fund has a history of providing total returns over a three-year period (8.44%).

• It provides regular monthly distributions.

Cons

• The share price has seen declines in the year-to-date, one-year, and three-year price return categories.

• The total return has been negative for both the year-to-date and one-year periods.

Beginner takeaway

When studying FMB, notice how the total return is often higher than the price return. This happens because the cash distributions help offset some of the share-price declines. Always distinguish between the price of a share and the total amount earned including distributions.