Understanding the FIRST TRUST MUNICIPAL HIGH INCOME ETF (FMHI)

What this ETF is trying to do

The FIRST TRUST MUNICIPAL HIGH INCOME ETF, known by its ticker symbol FMHI, is an exchange-traded fund (ETF). While the specific holdings are not listed in this report, the name suggests it focuses on municipal bonds that provide higher levels of income.

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 moves. Total return includes both the price changes and the cash distributions (dividends) paid out to investors.

Based on the data provided:

• Year-to-Date (YTD): The price return is approximately -3.61%. However, the total return is -0.74%.

• One Year: The price return was approximately -3.22%, while the total return was 1.08%.

• Three Year: The price return was approximately -0.28%, but the total return was 13.02%.

To see how the price alone has moved, we can look at an estimated price from roughly one year ago, which was $47.74. The current price is $46.20.

Income and distribution explanation

This ETF focuses on providing cash to investors. The distribution yield is approximately 4.51%. This number describes the cash distributions relative to the current ETF price. These payments usually happen monthly, with 12 payments recorded 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 income, they do not guarantee that your original investment will stay the same value.

NAV erosion explanation

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

For FMHI, the erosion score is 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 structure is currently showing stable patterns rather than significant price deterioration.

Pros

• The fund has a high income rating grade of "A."

• The three-year total return is positive at 13.02%, even though the share price itself has seen slight declines.

• The erosion-risk measurements suggest a stable pattern.

Cons

• The share price (price return) has been negative for the year-to-date, one-year, and three-year periods.

• Total returns have been negative for the year-to-date period.

Beginner takeaway

When looking at an ETF like FMHI, it is helpful to look at both the share price and the total return. A falling share price can be offset by the cash distributions the fund pays out, which is why the total return might be higher than the price return. Always remember that high yields provide cash, but they do not protect the principal investment from price changes.