ETF Education Report: First Trust Mortgage Income Fund (FMY)

What this ETF is trying to do

The First Trust Mortgage Income Fund (FMY) is an exchange-traded fund (ETF) listed on the NYSE. While the specific investment strategy is not detailed in the provided data, this type of fund generally focuses on providing income to its investors.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price.

• Total Return: This includes both the change in share price and any cash distributions (dividends) paid out.

For FMY, the numbers show different trends depending on how long you look:

• Year-to-Date (YTD): The price return is approximately -7.74%. However, the total return is higher at approximately -3.58%.

• One Year: The price return was approximately -7.74%, while the total return was approximately -1.49%.

• Three Years: The price return was approximately -0.80%, but the total return was much higher at approximately 23.47%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was about $12.15, and the current price is $11.21.

Income and distribution explanation

This ETF focuses on regular cash payments. The distribution yield is approximately 6.96%. This means the fund has paid out a significant amount of cash relative to its share price. Over the last 12 months, it made 12 distributions, which usually happen monthly. The trailing distributions were $0.78 per share.

It is important to remember that a high distribution yield does not guarantee that an investor's total investment will grow.

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.

FMY has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not mean the fund's value has definitely collapsed, but it suggests there has been some decline in price.

Pros

• The fund provides a regular monthly distribution.

• The three-year total return is positive at approximately 23.47%, showing that distributions have helped offset share-price declines over that period.

Cons

• The fund has experienced a share-price decline recently, with a one-year price return of approximately -7.74%.

• The erosion-risk score indicates "mild price erosion."

Beginner takeaway

When looking at funds like FMY, always look at the total return rather than just the price. Because this fund pays out regular cash, the share price might go down even while the total return stays higher. High yields can be helpful for income, but they do not protect you from a falling share price.